HANDBOOK April 2018

WIFIA Program Handbook

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Table of Contents

EXECUTIVE SUMMARY ......................................................................................................................... 4

CONTACT INFORMATION ..................................................................................................................... 6

INTRODUCTION TO WIFIA .................................................................................................................... 7

ELIGIBILITY REQUIREMENTS ............................................................................................................... 10

TERMS AND CONDITIONS OF WIFIA CREDIT ASSISTANCE ................................................................... 19

APPLICATION PROCESS SUMMARY .................................................................................................... 23

PROJECT SELECTION ........................................................................................................................... 29

PROJECT APPROVAL ........................................................................................................................... 36

NEGOTIATION AND CLOSING ............................................................................................................. 47

POST-CLOSING ACTIVITIES AND MONITORING ................................................................................... 49

APPENDIX A: ACRONYMS ............................................................................................................. 52

APPENDIX B: DEFINITIONS ........................................................................................................... 53

APPENDIX C: SELECTION CRITERIA ............................................................................................... 55

APPENDIX D: FEE SCHEDULE ......................................................................................................... 67

APPENDIX E: COMPLIANCE REQUIREMENTS ................................................................................ 68

APPENDIX F: CONFIDENTIAL BUSINESS INFORMATION (CBI) ......................................................... 71

APPENDIX G: LETTER OF INTEREST TIPS ......................................................................................... 73

APPENDIX H: NEPA APPLICABILITY OVERVIEW .............................................................................. 77

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E X E C U T I V E S U M M A R Y The WIFIA Program Handbook, written for prospective borrowers, describes how the U.S. Environmental Protection Agency (EPA) administers the Water Infrastructure Finance and Innovation Act (WIFIA) program (the WIFIA program).1 This handbook provides prospective borrowers with the information and resources needed to understand the requirements and procedures for obtaining WIFIA credit assistance and remaining in compliance with WIFIA program rules and regulations.

This handbook consists of eight sections and eight appendices as follows:

Section 1 – Introduction to WIFIA provides background information on the WIFIA program, introduces the WIFIA program’s objectives, and describes the administration and organization of the WIFIA program. This section helps the reader understand the mission of the WIFIA program, the legislative actions that created and fund the WIFIA program, and the different parties within the government that are involved in administering the WIFIA program.

Section 2 – Eligibility Requirements lists the statutory eligibility requirements that projects and entities applying for WIFIA credit assistance must meet, as well as the compliance requirements for borrowers receiving WIFIA credit assistance. This section helps the reader determine whether it is eligible to apply for WIFIA credit assistance and what successful borrowers must do to remain in compliance.

Section 3 – Terms and Conditions of WIFIA Credit Assistance presents the terms of WIFIA credit assistance required by statute, as well as key credit policies governing the WIFIA program.

Section 4 – Application Process Summary provides an overview of the process by which WIFIA credit assistance is awarded. It provides a high-level understanding of the major steps and milestones involved in obtaining WIFIA credit assistance and the order in which those steps occur.

Section 5 – Project Selection describes the selection phase of the application process, including the letter of interest submission and evaluation. This section helps prospective borrowers understand how to submit a complete letter of interest for WIFIA credit assistance and the process used by the WIFIA program to select projects to invite to submit applications.

Section 6 – Project Approval describes the approval phase of the application process, including application submission, evaluation, and approval. This section helps prospective borrowers understand how to submit a complete application for WIFIA credit assistance and what process and criteria the WIFIA program will use to evaluate and approve projects to receive WIFIA credit assistance.

Section 7 – Negotiation and Closing describes the closing process, which occurs after projects have been approved for WIFIA credit assistance, the WIFIA program’s requirements for proceeding to closing, and the structure and purpose of the credit agreement.

1 Electronic copies of this program handbook, application materials, and additional information regarding the WIFIA Program are located on the WIFIA website: http://www.epa.gov/wifia.

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Section 8 – Post-Closing Activities and Monitoring Requirements explains the activities and requirements that follow closing, including the process by which disbursements and loan servicing occur, as well as the general requirements that borrowers must fulfill to maintain good standing within the WIFIA program.

Appendix A – Acronyms spells out the acronyms used in the handbook.

Appendix B – Definitions defines key terms used throughout the handbook.

Appendix C – Selection Criteria describes the selection criteria and the way the WIFIA program will evaluate each criterion.

Appendix D – Fee Schedule outlines EPA’s final fee schedule.

Appendix E – Compliance Requirements lists laws and regulations with which borrowers receiving WIFIA credit assistance must comply.

Appendix F – Confidential Business Information provides information about the ability to make a business confidentiality claim

Appendix G – Letter of Interest Tips provides tips on correctly filling out each section of a letter of interest

Appendix H – NEPA Applicability Overview presents the criteria EPA uses to make a preliminary NEPA assessment for the proposed project

Application Materials, including letter of interest and application forms for the WIFIA program, are available on the WIFIA website at www.epa.gov/wifia.

WIFIA Legislation and Regulations, including the statute, the implementation rule, and the fee rule, are available on the WIFIA website at www.epa.gov/wifia.

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C O N T A C T I N F O R M A T I O N EPA welcomes questions and inquiries concerning the WIFIA program. The WIFIA program can be contacted at:

WIFIA program

wifia@epa.gov

202-564-2992

http://www.epa.gov/wifia.

Courier address:

Director, WIFIA Program US EPA William Jefferson Clinton West Building-room 6210 A 1301 Constitution Ave, NW Washington, DC 20004 Hearing- and speech-impaired persons may use TTY by calling the Federal Information Relay Service at 1-800-877-8339. To receive announcements from the WIFIA program, sign up at https://tinyurl.com/wifianews.

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SECTION 1

I N T R O D U C T I O N T O W I F I A The Water Infrastructure Finance and Innovation Act of 2014 (WIFIA) established a federal credit program (referenced hereafter as the WIFIA program) administered by the U.S. Environmental Protection Agency (EPA). The WIFIA program accelerates investment in water and wastewater infrastructure of national and regional significance by offering creditworthy borrowers loans2 for up to 49 percent of eligible project costs.

WIFIA authorizes EPA to provide secured (direct) loans and loan guarantees to eligible water infrastructure projects. Prospective borrowers will submit a letter of interest that demonstrates their projects’ eligibility, financial creditworthiness, engineering feasibility, and alignment with WIFIA selection criteria. Using the information provided in the letter of interest, EPA will evaluate and select projects based on criteria described in Section 5 of this handbook. For the selected projects, prospective borrowers will be invited to apply to EPA. In the application, selected prospective borrowers provide EPA with materials necessary to underwrite the proposed WIFIA assistance and to develop, through negotiation, individual credit agreements between the applicant and EPA.

WIFIA loans have distinct benefits that are not readily available in the capital markets. The WIFIA program can act as a patient investor and offer credit assistance with extended maturities due to the federal government’s long-term investment horizon. It can offer borrowers the advantage of developing customized terms, including sculpted repayment terms to match the specific needs of a project. Finally, the WIFIA program lends at a low, fixed interest rate equal to the Treasury rate for a comparable maturity.

EPA recognizes the importance of capital markets in developing and improving water and wastewater infrastructure throughout the nation. The WIFIA program is intended to complement existing funding resources rather than supplant them. All projects that receive WIFIA credit assistance must be co-financed with other sources of funding, including tax-exempt or taxable bonds, loans, grants, and equity.

2 WIFIA authorizes EPA to provide loans or loan guarantees. The term “loans” will be used throughout this handbook in place of “loans or loan guarantees.”

The Water Infrastructure Finance and

Innovation Act (WIFIA) program accelerates investment in our

nation’s water and wastewater infrastructure by providing long-

term, low-cost, supplemental credit assistance under customized terms

to creditworthy water and wastewater projects of national and

regional significance.

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EPA balances the distinct credit advantages that the WIFIA program offers with prudent lending practices. The WIFIA program will only fund projects that it finds to be creditworthy during the evaluation process.

1 .1 LEGISLATIVE REFERENCE Congress enacted the WIFIA program as part of the Water Resources Reform and Development Act of 20143 (WRRDA). WIFIA was subsequently amended by The Fixing America’s Surface Transportation (FAST) Act of 20154 and the Water Infrastructure Improvements for the Nation Act of 20165. Chapter 52 of Title 33 of the United States Code6 codifies WIFIA, with supporting regulations appearing in 40 C.F.R. 35 subpart Q. These documents are provided on the WIFIA program website at www.epa.gov/wifia.

1 .2 FUNDING OF WIF IA CREDIT ASS ISTANCE The WIFIA program is governed by The Federal Credit Reform Act of 19907. Therefore, EPA is required to estimate the long-term credit subsidy cost of each WIFIA loan, account for this cost with an appropriation by Congress, and set it aside in a reserve. EPA must estimate and set aside this reserve before it can close or disburse WIFIA credit assistance. Congress appropriates funding to cover the credit subsidy cost of WIFIA credit assistance. Congress may also set a loan limit on the total amount of WIFIA credit assistance that can be extended under each appropriation.

1 .3 PROGRAM ADMINISTRATION The WIFIA program provides credit assistance to eligible borrowers. It is housed in the Water Infrastructure Division in the Office of Wastewater Management within the Office of Water and led by a Program Director.

3 P.L. 113-121, §§ 5022-5035 4 P.L. 114-94 5 P.L. 114-322 6 33 U.S.C. §§ 3901-3914 7 2 U.S.C. § 661 et eq.

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FIGURE 1-1: WIFIA PROGRAM ORGANIZATIONAL STRUCTURE

As displayed in Figure 1-1, the WIFIA program is led by the Program Director and comprised of six teams:

Program Director manages the WIFIA program, develops program policy, and leads interaction with the Credit Council and EPA leadership.

Program Management team provides comprehensive program support. Functions include communication, project selection, organizational operations, and program evaluation.

Origination and Underwriting team focuses on individual transactions from the receipt of the letter of interest to loan closing. Its functions include determining preliminary creditworthiness, leading individual transactions through the WIFIA application process, leading the WIFIA team through individual transaction evaluations, and negotiating loan terms and agreements.

Portfolio Management team manages assets and monitors the financial compliance of approved projects. Its responsibilities include disbursement processing, loan monitoring, loan amendments, and loan workouts.

Engineering team assesses the project’s technical assumptions, as well as its construction and operating feasibility. This team is also responsible for determining eligible project costs and ensuring borrower compliance with Federal requirements, such as National Environmental Policy Act (NEPA) and crosscutters.

Legal team supports the WIFIA program in structuring, reviewing, guiding, and documenting credit transactions. The team also provides opinions and recommendations to the WIFIA program on legal issues affecting WIFIA transactions, including compliance with WIFIA statute and rules as well as other applicable Federal laws.

Credit Policy and Risk Management team takes a portfolio view of credit risks and programmatic policies. Its tasks include determining transactional credit risk and how that is quantified in the subsidy model, tracking programmatic repayment risk, controlling credit subsidy estimation, and maintaining and recording office credit and policy decisions.

Program Director

Program Management

Origination and Underwriting

Portfolio Management Engineering Legal Credit Policy and

Risk Management

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SECTION 2

E L I G I B I L I T Y R E Q U I R E M E N T S This section outlines the requirements that entities applying for and receiving WIFIA credit assistance must satisfy, as defined by the WIFIA statute, regulations, and EPA policy. Should a letter of interest or application demonstrate that the prospective borrower or project is not eligible, the WIFIA program will not continue evaluating the letter of interest and will not consider the project for WIFIA credit assistance. If you have eligibility questions, contact the WIFIA program prior to submitting a letter of interest.

2 .1 EL IGIBLE BORROWERS The entity applying for WIFIA credit assistance must be one of the following:8

• A corporation.

• A partnership.

• A joint venture.

• A trust.

• A federal, state or local government entity, agency, or instrumentality.

• A tribal government or consortium of tribal governments.

• A State Revolving Fund (SRF) program as defined by the Clean Water Act and the Safe Drinking Water Act.9

2 .2 EL IGIBLE PROJECTS Prospective borrowers may only apply for WIFIA credit assistance with the purpose of undertaking one or several of the following eligible projects.10

1. Wastewater projects that are eligible for the Clean Water SRF as described under section 603 of the Federal Water Pollution Control Act,11 notwithstanding the public ownership requirement under paragraph (1) of that subsection. The Clean Water State Revolving Fund website provides additional eligibility information for this project type.

8 33 U.S.C. § 3904(1-7) 9 33 U.S.C. § 1383 and 42 U.S.C. §§ 300j-12(a)(2) 10 33 U.S.C. § 3905(2-10) 11 33 U.S.C. § 1383

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2. Drinking water projects that are eligible for the Drinking Water SRF as described in section 1452(a)(2) of the Safe Drinking Water Act.12 The Drinking Water State Revolving Fund website provides additional eligibility information for this project type.

3. Projects that enhance energy efficiency in the operation of a public water system or a publicly owned treatment works.

4. Projects for repair, rehabilitation, or replacement of a treatment works, community water system, or aging water distribution or waste collection facility (including a facility that serves a population or community of an Indian reservation).

5. A brackish or sea water desalination project, including chloride control, a managed aquifer recharge project, a water recycling project, or a project to provide alternative water supplies to reduce aquifer depletion.

6. A project to prevent, reduce, or mitigate the effects of drought, including projects that enhance the resilience of drought-stricken watersheds.

7. The acquisition of real property or an interest in real property. The acquisition must either be integral to an eligible project described above, or would mitigate the environmental impacts of water resources infrastructure projects otherwise eligible for WIFIA assistance, as determined by the Administrator.

8. A combination of eligible wastewater or drinking water projects, as defined in the first and second bullet above, for which a SRF program submits a single application.

9. A combination of eligible projects, described in paragraphs 1-7 above, secured by a common security pledge, for which a single eligible entity, or a combination of eligible entities, submits a single application.

For clarity, eligible projects, including combinations of projects, will be referred to as a single project in this document.

DEFINITION OF PROJECT An individual project consists of all the construction necessary to complete the building or work regardless of the number of contracts or sources of funding involved so long as all contracts and sources of funding are closely related in purpose, time, and place. This precludes the intentional splitting of projects into separate and smaller contracts with separate sources of funding to avoid federal requirement compliance on some portion of a larger project, particularly where the activities are integrally and proximately related to the whole. However, there are many situations in which major construction activities are clearly undertaken in separate phases that are distinct in purpose, time, or place, in which case, WIFIA credit assistance for one or more phases would carry separate requirements from non-WIFIA funded phases.

In general, a project should involve new construction or work. This does not mean that a project can only involve brand new infrastructure that did not previously exist. Rather, new construction or work

12 42 U.S.C. §§ 300j-12(a)(2)

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can relate to existing infrastructure. For example, repair, rehabilitation or replacement of an existing plant or pipes would involve new construction and would be considered an eligible project. In addition, projects such as water conservation and surface water protection and restoration are eligible for WIFIA funding. Such projects may include land purchases and programmatic expenses and may not include construction.

WIFIA can also fund more than one discrete construction projects through a single loan. The multiple discrete projects will be considered a single “project” for purposes of determining project size, loan size and other requirements. For ease of implementation during the due diligence process, the WIFIA program recommends taking the following into consideration when identifying a combination of individual projects to include in one loan application:

• The loan for a combination of projects must be secured by a common security pledge.

• All projects should serve a common purpose.

• All projects should have similar construction time frames.

These considerations do not apply to a combination of projects submitted to EPA by an SRF program under a single application. SRF programs are allowed by statute to submit an application for a combination of projects. In effect, an SRF program receiving a WIFIA loan is capitalizing its program through the addition of WIFIA loan proceeds to its base program. By its nature, SRF programs lend to a variety of different projects with different security pledges, purposes, and construction time frames. Therefore, SRF programs do not have to adhere to the same requirements as other borrowers for purposes of this section.

2 .3 COST THRESHOLD For a project to be eligible for WIFIA credit assistance, the project’s eligible costs, as defined in Section 2.6, must be reasonably anticipated to be at least $20 million.13 This threshold is lower for projects serving small communities. Small community projects must be reasonably anticipated to total at least $5 million. The statute defines projects in small communities as drinking water and wastewater projects, as defined in numbers 1 and 2 of the eligible project list in Section 2.2, that serve a community of not more than 25,000 individuals.14

2 .4 PUBLIC SPONSORSHIP Eligible projects carried out by private entities must be publicly sponsored. To satisfy this requirement, the prospective borrower must demonstrate that it has consulted with and gained the support of the affected state, local, or tribal government in which the project is located. 15 The prospective borrower can show support by including a certified letter signed by the approving State, tribal, or municipal department or similar agency; governor, mayor or other similar designated authority; statute or local ordinance, or any other means by which government approval can be evidenced.

13 33 U.S.C. § 3907(a)(2)(A) 14 33 U.S.C. § 3907(a)(2)(B) 15 33 U.S.C. § 3907(a)(4)

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2.5 CREDITWORTHINESS Projects applying for WIFIA credit assistance must demonstrate a reasonable assurance of repayment of the credit instrument over the term of the requested assistance. In determining a project’s creditworthiness, the Administrator considers the following:

• The terms and conditions of the proposed financing.

• The financial structure and security features of the proposed financing.

• The dedicated revenue sources that will secure or fund the project obligation.

• The financial assumptions upon which the project is based.

• The financial soundness, credit history, and outlook of the prospective borrower.16

2 .6 EL IGIBLE COSTS Not all costs associated with eligible projects are eligible project costs. To determine whether a project meets the eligibility threshold for minimum project size, the WIFIA program must verify the eligibility of the project costs and calculate the total amount of eligible project costs included in the project. The WIFIA program must also ensure that the amount of WIFIA credit assistance as a percentage of total eligible project costs does not exceed the maximum percentage allowed under the statute, budget authority, and funding legislation. Eligible project costs are costs associated with the following activities, as defined in the statute:17

• Development-phase activities, including planning, feasibility analysis (including any related analysis necessary to carry out an eligible project), revenue forecasting, environmental review, permitting, preliminary engineering and design work, and other preconstruction activities.

• Construction, reconstruction, rehabilitation, and replacement activities.

• The acquisition of real property or an interest in real property (including water rights, land relating to the project, and improvements to land), environmental mitigation (including acquisitions that would mitigate the environmental impacts of water resource infrastructure projects otherwise eligible for WIFIA credit assistance), construction contingencies, and acquisition of equipment.

• Capitalized interest necessary to meet market requirements, reasonably required reserve funds, capital issuance expenses, and other carrying costs during construction. Capitalized interest on WIFIA credit assistance may not be included as an eligible project cost.

Additionally, indirect costs allocable to the development, oversight, or management of a project are generally eligible, subject to a Federally negotiated cost rate.

Prospective borrowers may request that costs incurred prior to submission of an application for credit assistance, including the value of any integral in-kind contributions, be included as a part of eligible

16 33 U.S.C. § 3907(a)(1)(B) 17 33 U.S.C. § 3906

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project costs and be credited toward the 51 percent of project costs to be provided by sources of funding other than from the WIFIA program. The WIFIA program will approve such requests on a case-by-case basis. This provides WIFIA borrowers the opportunity to include costs incurred prior to loan closing, including in-kind contributions, in the calculation of total eligible costs to calculate the size of the loan. Because WIFIA loan proceeds are fungible and are not tied to specific eligible costs, any eligible costs included in the calculation of total eligible project costs may be reimbursed with WIFIA loan proceeds. This also applies to the eligible costs that were previously-incurred to be credited toward the 51 percent of the eligible project costs provided by non-WIFIA sources.

The WIFIA program will consider funding project costs incurred up to 5 years prior to the date of the application for WIFIA assistance for purposes of sizing a WIFIA loan. These costs must be directly related to the development or execution of the project including preliminary design, right-of-way acquisition, and NEPA compliance related costs. WIFIA will only reimburse costs incurred prior to financial close to the public obligor that will be the direct recipient of the proposed WIFIA loan. In addition, the WIFIA program will only reimburse such costs in an amount up to 50 percent of the value of the WIFIA loan. WIFIA will not refinance completed projects. Projects are required to be pre-construction or under construction at the time of loan closing. The WIFIA program retains the right to ask for appropriate documentation to evidence such costs for both sizing the WIFIA loan and reimbursement.

Expenses associated specifically with the WIFIA application process that are not necessary for the issuance of other debt, are not eligible activities and may not be included in the total eligible project costs. However, fees charged by the WIFIA program, as described in Section 6.1, may be financed by the WIFIA credit assistance and are included in the calculation of eligible project costs.

2 .7 FEDERAL COMPLIANCE REQUIREMENTS Projects receiving WIFIA credit assistance must comply with all relevant federal laws and regulations. The following subsections describe four requirements that are of particular importance to the WIFIA program. Appendix E lists additional compliance requirements, but is not intended as a comprehensive inventory. Appendix H provides prospective borrowers an overview of how EPA will assess the appropriate level of National Environmental Policy Act (NEPA) review for an individual project. This is provided for informational purposes.

AMERICAN IRON AND STEEL (AIS) REQUIREMENT The statute requires borrowers receiving WIFIA credit assistance to use iron and steel products produced in the United States.18 Borrowers may not use WIFIA credit assistance for the construction, alteration, maintenance, or repair of a project eligible for assistance unless all the iron and steel products used in the project are produced in the United States. Therefore, even iron and steel products not purchased or financed by WIFIA, must comply with this requirement. By statute, ‘‘iron and steel products’’ means the following products made primarily of iron or steel: lined or unlined pipes and fittings, manhole covers and other municipal castings, hydrants, tanks, flanges, pipe clamps and restraints, valves, structural steel, reinforced precast concrete, and construction materials.19 Equipment

18 33 U.S.C. § 3914 19 33 U.S.C. § 3914(b)

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employed in construction but which does not become part of the project is not an “iron and steel product” for the purposes of this requirement.

Guidance developed for compliance with AIS requirements for EPA’s SRF programs applies to projects receiving WIFIA credit assistance. Such guidance can be found on EPA’s website at: https://www.epa.gov/cwsrf/state-revolving-fund-american-iron-and-steel-ais-requirement.

EPA may grant waivers for a case or category of cases upon request from the borrower. EPA will grant a waiver if it finds that (i) applying these requirements would be inconsistent with the public interest; (ii) iron and steel products are not produced in the US in sufficient and reasonably available quantities and of a satisfactory quality; or (iii) inclusion of iron and steel products produced in the US will increase the cost of the overall project by more than 25 percent. Prospective borrowers should contact the WIFIA program with any questions regarding AIS requirements and waivers.

The following national waivers issued by EPA apply to projects receiving WIFIA credit assistance in the same manner as they apply to projects receiving assistance under the Clean Water and Drinking Water SRF programs:

• Short-Term National Product Waiver for Stainless Steel Nuts and Bolts Used in Pipe Couplings, Restraints, Joints, Flanges, and Saddles

• One-Year Extension of the Short-Term National Product Waiver for Stainless Steel Nuts and Bolts Used in Pipe Couplings, Restraints, Joints, Flanges, and Saddles

• One-year Extension of the Short-Term National Product Waiver for Stainless Steel Nuts and Bolts Used in Pipe Couplings, Restraints, Joints, Flanges, and Saddles

• National Product Waiver for Pig Iron and Direct Reduced Iron

• De Minimis Waiver

Each of these national waivers can be found on EPA’s website at: https://www.epa.gov/cwsrf/american-iron-and-steel-requirement-approved-national-waivers-0.

DAVIS-BACON WAGE REQUIREMENT The statute requires WIFIA borrowers pay all laborers and mechanics employed by contractors or subcontractors wages at rates not less than those prevailing for the same type of work on similar construction in the immediate locality, as determined by the Secretary of Labor.20 This is commonly referred to as the Davis-Bacon wage requirement. This requirement applies to all laborers and mechanics working on a project, not only those paid from WIFIA credit assistance. Further guidance can be found on the Department of Labor’s website at: https://www.dol.gov/whd/govcontracts/dbra.htm.

NATIONAL ENVIRONMENTAL POLICY ACT OF 1969 Projects selected to apply for WIFIA loans are required to comply with the National Environmental Policy Act (NEPA) of 1969, 42 U.S.C. § 4321 et seq., which mandates that Federal agencies consider the effects of their actions, including programs, regulations, policies, and grant-funded specific projects, on the 20 33 U.S.C. § 3909(e)

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quality of the human environment. The Council of Environmental Quality has established NEPA implementing regulations at 40 C.F.R. part 1500 for meeting these requirements, and each Federal agency has developed its own implementing procedures specific to its mission. NEPA requirements do not apply at the letter of interest stage, and therefore compliance with NEPA is not a prerequisite for submitting a letter of interest.

During the project approval stage, each proposed WIFIA project must be assessed for its impact on the environment under the guidelines set forth by the NEPA.21 EPA will not obligate funds for a loan prior to completing its NEPA review.

The applicant must provide information to the WIFIA program about the project and its potential environmental effects. The program and the applicant will discuss the scope of information to be provided to the program in its application. This information may include the project description and potential environmental impacts of the proposed project, its purpose and need, project details and design, and costs. EPA is responsible for the NEPA review. In carrying out its responsibilities, EPA will take the following actions:

• Review the information submitted by the applicant.

• Determine the adequacy of the information submitted for making a decision on the appropriate level of environmental review under NEPA.

• Prepare the appropriate environmental review document (Categorical Exclusion determination, Environmental Assessment, or Environmental Impact Statement) or review and adopt environmental review documents prepared by the applicant, other federal agency, or a third-party contractor and ensure its accuracy.

• If necessary, issue a EA or draft/final EIS and take public comment.

• If necessary, complete the NEPA process through preparation of the appropriate decision-making document such as a final finding of no significant impact (FONSI) or ROD.

EPA has compiled additional information included in Appendix H to provide an overview of how EPA will evaluate the appropriate level of NEPA review. Figure 2-1 below provides a flowchart for WIFIA NEPA compliance.

Categorical Exclusion (CATEX): The applicant can review EPA’s list of actions that may be categorically excluded at 40 C.F.R. § 6.204 to determine if the project fits within an established CATEX. An applicant who concludes that the project may qualify for a CATEX may request a CATEX determination from EPA; or EPA may determine that a proposed project may be eligible for a CATEX during initial discussions with the applicant about the proposed project. If EPA determines the project does not qualify for a CATEX, the applicant will provide EPA with more detailed information on the proposed project in the form of an Environmental Information Document (EID).

Environmental Information Document: If EPA determines that the project does not qualify for a CATEX, EPA will likely ask the applicant to submit an EID to EPA to provide information about the project and its

21 42 U.S.C. § 4321

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potential environmental effects, if a previously completed EID was not already provided to EPA. The EID provides basic project information including a detailed description of the proposed project and evaluates the environmental impacts and alternatives to the proposed project. The scope and level of detail of the EID should be commensurate with the magnitude and significance of the proposed project.

The applicant should consult with EPA to obtain information on the processes to follow when preparing an EID and the information that should be included. If the applicant holds one or more public meetings as part of preparing the EID, a description of the process and any additional documentation should be included in the EID. Please be aware that EPA may request additional information from applicant if insufficient information has been provided for EPA to conduct the NEPA review.

Environmental Assessment (EA): If EPA determines that the proposed project does not qualify for a CATEX, EPA may evaluate the proposed project in an EA. The prospective borrower’s role in the EA process is to provide sufficient information in the EID submitted to EPA. In some cases, the prospective borrower may submit a draft EA and supporting documents in lieu of an EID. EPA may contact the prospective borrower during the EA preparation process to request additional information on the project or its potential impacts. If the EA results in a FONSI, the prospective borrower may also be asked to assist EPA in conducting any public review process. The prospective borrower should consult with EPA for the exact processes to follow.

Environmental Impact Statement (EIS): If EPA determines that the applicants proposed project does not qualify for a CATEX or EA, or an EA has concluded that significant impacts will occur, EPA may evaluate the proposed project in an EIS. EPA may enter into a third-party agreement with the applicant to hire a consulting firm to prepare the EIS. As the project’s proponent, the applicant may be asked to assist EPA (e.g., by providing project information, assisting with public meetings or hearings, and helping to respond to comments that require project changes). After the EIS is complete, EPA will make a decision on the action it will take and formalize it in a ROD.

NATIONAL HISTORIC PRESERVATION ACT (NHPA) The National Historic Preservation Act (NHPA) embodies a long-standing national policy to preserve historic sites, buildings, structures, districts and objects of national, state, tribal, local, and regional significance and, among other things, to protect such historic properties from adverse impacts caused by activities undertaken or funded by federal agencies. NHPA expanded the scope of the 1935 Historic Sites Act (Pub. L. No. 74-292) by establishing the National Register of Historic Places, a listing of historical and cultural resources maintained by the U.S. Department of the Interior (DOI).

The fundamental responsibilities of federal agencies are expressed in Section 106 of the Act, which reads:

The head of any Federal agency having direct or indirect jurisdiction over a proposed or federally assisted undertaking in any State and the head of any Federal department or independent agency having authority to license any undertaking shall, prior to approval of the expenditure of any Federal funds on the undertaking or prior to the issuance of any license, as the case may be, take into account the effect of the undertaking on any district, site, building, structure, or object that is included in or eligible for inclusion in the National Register. The head of any such Federal agency shall afford the Advisory

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Council on Historic Preservation established under title II of this Act (16 U.S.C. § 470i et. seq.) a reasonable opportunity to comment with regard to such undertaking (16 U.S.C. § 470(f)).22

The NHPA is administered by the DOI and the Advisory Council on Historic Preservation (the Council). The Council implements Section 106 of the NHPA and has promulgated regulations for consultation regarding how to determine the effects of federal agency undertakings on historic properties (36 C.F.R. Part 800). Although under certain circumstances the Council may become directly involved in such consultations, the procedures generally call for consultation between the federal agency and relevant state or tribal historic preservation officers (SHPOs and THPOs) and other interested parties, including applicants for federal assistance (who may be authorized to initiate consultation with the SHPO/THPO and others – 36 C.F.R. § 800.2(c)(4)). The consultation process generally involves a series of determinations regarding the area of potential effect of the undertaking, whether there are historic properties (defined as any prehistoric or historic district, site, building, structure, or object included in, or eligible for inclusion in, the National Register of Historic Places – 36 C.F.R. § 800.16(l)) within such area, and, if so, whether such properties may be affected and how to address any adverse effects.

EPA, in consultation with the Advisory Council or SHPO/THPO, as well as other interested parties, must first determine whether a project might affect historic properties that are included or eligible for inclusion on the National Register. This step is done by identifying whether there are historic properties in the project area. EPA reviews background information, consults with the SHPO/THPO and others, seeks information from knowledgeable parties, and conducts additional studies as necessary. Unlisted properties are evaluated against the National Park Service’s published National Register criteria, in consultation with the SHPO/THPO and any Indian Tribe or Native Hawaiian organization that may attach religious or cultural importance to them.

If EPA finds that historic properties are present, the next step is to assess possible adverse effects. Again, consultation must occur with the SHPO/THPO and other interested parties. If they agree that there will be no adverse effect, the agency proceeds with the undertaking and any agreed upon conditions. If the parties cannot agree or they find that there is an adverse effect, the agency begins consultation to identify ways to avoid, minimize, or mitigate adverse effects. This process also requires consultation with the SHPO/THPO and others, including Indian Tribes and Native Hawaiian organizations, local governments, and members of the public. If, because of disagreement among the appropriate parties, the agency cannot issue a determination that no historic or cultural properties are in the project area, that resources do exist in the project area but will not be adversely affected, or that adequate mitigating measures will be taken to avoid or reduce adverse effects to resources in the project area, the agency will then enter into consultations with all parties to resolve the dispute.

22 Under relevant Section 106 implementing regulations, undertaking means a project, activity, or program funded in whole or in part under the direct or indirect jurisdiction of a federal agency, including: those carried out by or on behalf of the agency; those carried out with federal financial assistance; and those requiring a federal permit, license, or approval (36 C.F.R. § 800.16(y)).

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SECTION 3

T E R M S A N D C O N D I T I O N S O F W I F I A C R E D I T A S S I S T A N C E To meet its mission, the WIFIA program can structure WIFIA credit instruments to provide low cost, long-term, supplemental credit assistance under customized terms to qualified projects. To access these benefits, credit assistance must comply with all statutory terms and conditions and programmatic credit policies. The statute authorizes the WIFIA program to provide both secured loans and guarantees on a loan or other debt obligation issued by a borrower and funded by a third-party lender.

This section summarizes the terms and conditions that apply to WIFIA secured loans, including those required by the statute and by credit policies established by the WIFIA program.23 These terms and conditions support the requirement that projects must be deemed creditworthy by the Administrator to be eligible for WIFIA credit assistance.

3 .1 STATUTORY TERMS AND CONDIT IONS The statute mandates several terms and conditions for WIFIA credit assistance. These requirements represent threshold inputs to the development of a finance plan and are as follows:

Maximum Amount: The amount of WIFIA credit assistance may not exceed 49 percent of the reasonably anticipated eligible project costs, as defined in Section 2.6.24,25 WIFIA credit assistance may not exceed the amount of the project’s senior obligations unless the WIFIA credit instrument receives an investment-grade rating from a Nationally Recognized Statistical Rating Organization (NRSRO).26

Maximum Federal Involvement: Total federal assistance for any project may not exceed 80 percent of total project costs.27

23 The WIFIA program does not anticipate immediate demand for the loan guarantee instrument based on experience from comparable government credit programs. Information about loan guarantee terms will be added in a subsequent version of the handbook. Prospective borrowers interested in a loan guarantee should contact the WIFIA program for additional information. 24 33 U.S.C. § 3908(b)(2)(A) 25 The statute authorizes EPA to use up to 25% of its budget authority appropriated through Fiscal Year 2019 to provide credit assistance to one or more projects of up to 80% of the total costs of any given project. EPA will use this authority only in extraordinarily exceptional circumstances, such as where a project would be unable to proceed to closing absent such additional assistance due to unforeseen events. Unforeseen events that could prevent a project from going to closure may include, but are not limited to: unexpected cost revisions, unexpected loss of other sources of financing, increased cost of capital, or acts of nature. In such an event, EPA will reexamine the creditworthiness of the project and only provide funding if the project can still meet all requirements of the program. EPA will not entertain requests for use of this authority in a letter of interest or application. 26 33 U.S.C. § 3908(b)(2)(B) 27 The maximum federal involvement does not apply to certain rural water projects that are authorized to be carried out by the Secretary of the Interior, include federally-recognized Indian tribes among the beneficiaries and for which the authorized Federal share of the total project costs is greater than 80%. 33 U.S.C. § 3908(b)(9)(B).

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Interest Rate: The WIFIA program offers fixed-rate credit instruments. The interest rate of the WIFIA credit instrument will be no less than the yield on U.S. Treasury securities of a similar maturity to that of the WIFIA credit assistance on the date of execution of the credit agreement.28 To establish the interest rate on the date of the loan closing, the WIFIA program will identify the Treasury rates through use of the daily rate tables published by the Bureau of the Public Debt for State and Local Government Series (SLGS) investments. The WIFIA program will then add one basis point to the SLGS rate as this is equal to the Treasury rate. To estimate the yield on comparable Treasury securities, the WIFIA program will use a maturity that is closest to the weighted average loan life of the WIFIA credit assistance, measured from first disbursement.29

Maturity Date: The final maturity date of the WIFIA credit instrument must be the earlier of 35 years after the date of substantial completion of the relevant project, or the useful life of the project (as determined by the Administrator).30 If the borrower is a SRF program, the final maturity date of WIFIA credit assistance must be no later than 35 years after the first disbursement of funds.

Debt Service Payment Terms: Scheduled payments on the WIFIA credit instrument must commence no later than five (5) years following substantial completion of the project.31 The debt service payment schedule may be sculpted to accommodate the projected cash flow from project revenues and other sources. If the borrower is a SRF program, scheduled payments shall commence no later than five (5) years after the date of the first disbursement.

Dedicated Source of Repayment: WIFIA credit assistance must be repaid using a dedicated source of repayment or security pledge that is the same in all material respects as the security pledged to the project’s senior obligations.32 The WIFIA program interprets “dedicated revenue sources” to include such levies as taxes, rate revenue, transfers pledged from state or local governments, dedicated taxes, a municipal general obligation pledge, revenues that are pledged for the purpose of retiring debt on the project, and general recourse corporate undertakings.

Deferrals: Debt service payments on the WIFIA credit instrument, in accordance with the debt service payment schedule, may be deferred on a case-by-case basis at the sole discretion of the Administrator. The Administrator may grant a deferral only if there remains a reasonable assurance of repayment of the WIFIA credit instrument and the final maturity of the WIFIA credit instrument remains unchanged. Under a deferral, any unpaid principal and interest will be added to the outstanding balance of the WIFIA credit instrument.

Security Features: WIFIA credit assistance shall include a rate covenant, coverage requirement, or similar security feature supporting the project obligations.33

28 33 U.S.C. § 3908(b)(4) 29 The SLGS tables can be found online at https://www.treasurydirect.gov/GA-SL/SLGS/selectSLGSDate.htm. 30 33 U.S.C. § 3908(b)(5)(A) 31 33 U.S.C. § 3908(c)(2) 32 33 U.S.C. § 3908(b)(3)(A) 33 33 U.S.C. § 3908(b)(3)(B)

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Prepayment Conditions: A borrower may prepay WIFIA credit assistance in whole or in part without penalty at any time.34 WIFIA credit assistance may not be prepaid using federal funds.

Lien Priority: A WIFIA loan may not be subordinated in security and priority to other debt obligations such as bonds or SRF loans used to fund the project. A WIFIA loan may, on a case by case basis, be subordinate in priority and security to previous or future debt obligations an eligible entity may incur for other purposes unrelated to the WIFIA project. Such cases will generally be limited to highly rated public agency borrowers with on-going debt issuance programs (such as through a preexisting indenture) where the WIFIA loan is rated in the A category or higher.

Fees: All WIFIA credit assistance is subject to fees, as described in Appendix D, to cover all or a portion of EPA’s costs associated with providing credit assistance.

Non-Federal Share: The proceeds of a secured loan under this section may be used to pay any non-federal share of project costs required if the loan is repayable from non-federal funds.

3 .2 CREDIT POLIC IES EPA must deem a project creditworthy for it to be eligible for WIFIA credit assistance. In support of this requirement, the WIFIA program has established credit policies. These policies influence the structuring of project financing plans and guide the WIFIA program’s creditworthiness determination. The credit policies are as follows:

Disbursement Timing: The WIFIA program will disburse proceeds of the WIFIA credit instrument to reimburse eligible project costs incurred based on submitted invoices and receipts. Disbursements may be scheduled as often as once per month.

Credit Rating Opinions: Credit ratings from NRSROs will supplement but not supplant the WIFIA program’s evaluation and determination of creditworthiness.

Federal Appropriations: The WIFIA program will not consider proposals for financial assistance from prospective borrowers whose creditworthiness is significantly dependent on future federal appropriations.

Interest Capitalization: WIFIA credit assistance may capitalize interest as warranted by the cash flow profile of the project. The WIFIA program will review the transaction’s resulting capital structure, creditworthiness, and uses of any excess cash prior to accepting any proposed interest capitalization periods that are post substantial completion of the project.

Amortization Requirement: The WIFIA program will seek to amortize the WIFIA credit instrument over the useful life of the project. In some instances, the WIFIA program may require borrowers to prepay the WIFIA credit instrument with excess revenues, refinancing proceeds, or trapped cash flow, as appropriate.

Variable Rate Interest Exposure: The WIFIA credit instrument will not be exposed to material amounts of variable rate debt in the borrower’s capital structure.

34 33 U.S.C. § 3908(c)(4)(B)

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Additional Debt: If the financial plan contemplates future additional indebtedness, EPA will require an additional bonds test to ensure that such issuances do not weaken the creditworthiness of the WIFIA credit instrument over the long term.

Useful Life of Projects: In determining the useful life of a project, EPA will consider the operational life of the key asset(s) being financed, the capability of the project to generate cash flow over time, the certainty of project cash flows over time, and other existing and potential demands on project cash flows over the term of the WIFIA credit instrument.

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SECTION 4

A P P L I C A T I O N P R O C E S S S U M M A R Y This section provides an overview of the application and approval process. EPA’s review of projects can be categorized into three phases as illustrated in Figure 4-1.

FIGURE 4-1: WIFIA PROGRAM APPLICATION PROCESS

Phase 1: Project Selection: EPA announces the amount of funding it will have available and solicits letters of interest from prospective borrowers. In the letter of interest, prospective borrowers demonstrate their project’s eligibility, creditworthiness, engineering feasibility, and alignment with EPA’s policy priorities. Based on this information, EPA selects projects which it intends to fund and invites them to continue to the application process. More details are provided in Section 5.0.

Phase 2: Project Approval: Each invitee submits an application for WIFIA credit assistance. Using this information, the WIFIA program conducts a detailed financial and engineering review of the project. Based on that review, the WIFIA program proposes terms and conditions for the project and negotiates with the applicant until they develop a mutually agreeable term sheet. The Administrator demonstrates project approval by executing the project’s term sheet. More details are provided in Section 6.0.

Phase 3: Negotiation and Closing: Based on the term sheet, the WIFIA program finalizes the terms of credit assistance to a prospective borrower. At closing, the Administrator or his designee and the applicant execute the credit agreement, which is the binding legal document that allows the borrower to receive WIFIA funds. More details are provided in Section 7.0.

Table 4-1 describes the steps that are undertaken during each phase of the application process. Section 5.0 through Section 7.0 of this handbook describe each of the three phases in greater detail.

During the WIFIA credit assistance selection and approval process, the WIFIA program interacts with entities both within and outside EPA. These entities are listed in Figure 4-2 and described below.

Project Selection

• NOFA• Letter of Interest (LOI)

Submission• LOI Evaluation• Project Selection

Project Approval

• Application Submission

• Application Evaluation• Project

Recommendation• Approval

Negotiation and Closing

• Closing Activities

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Table 4-1: WIFIA Program Application Process

Phase Step Responsible Party Pr

ojec

t Sel

ectio

n

Notice of Funding Availability (NOFA) Submit NOFA to Federal Register

Administrator

Letter of Interest Submission Prepare the letter of interest and submit it to the WIFIA

program

Prospective borrower

Letter of Interest Evaluation Confirm eligibility of projects and prospective borrowers,

perform preliminary creditworthiness evaluation, determine project feasibility, and evaluate project against selection criteria

WIFIA program and Office of Water Staff

Project Selection Select eligible projects to invite to submit applications

based on letters of interest Invite prospective borrowers to apply

Selection Committee WIFIA program

Proj

ect A

ppro

val

Application Submission Prepare and submit the application, including a

preliminary rating opinion letter and the application fee, and present the project to the WIFIA program

Applicant

Application Evaluation Evaluate and determine creditworthiness of the

applications Develop mutually agreed-upon terms and conditions for

WIFIA credit assistance

WIFIA program WIFIA program and applicant

Project Recommendations Prepare and present a recommendation for the project to

the Credit Council Review and approve credit subsidy estimation Prepare and present a recommendation for the project to

the Administrator

WIFIA program

OMB Credit Council and WIFIA program

WIFIA Credit Assistance Approval Decide on the approval of the project, execute the term

sheet, and authorize the subsequent negotiation of a credit agreement

Inform the prospective borrower of the Administrator’s decision, and provide term sheet and closing date

Administrator

WIFIA program

Neg

otia

tion

and

Clos

ing

Closing Activities Negotiate and draft the final credit agreement with the

prospective borrower Demonstrate fulfillment of conditions precedent to

closing. Execute credit agreement

WIFIA program Applicant

Administrator or designee and applicant

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Figure 4-2: WIFIA Program Project Selection and Approval Entities

The EPA Administrator grants final approval of applications for WIFIA credit assistance and executes the credit agreement at closing (execution of the credit agreement may be delegated to the Assistant Administrator for the Office of Water). The Administrator sets policy and priorities for EPA and for the WIFIA program.

The Office of Management and Budget (OMB) reviews and approves the final credit subsidy cost before the Administrator can approve any application for WIFIA credit assistance. In addition, OMB gives EPA the authority to commit resources via an apportionment.

A Credit Council serves in an advisory capacity to EPA. It reviews the findings of the WIFIA program, and advises the Administrator or his designee regarding the creditworthiness of applications. It also advises the Program Director and approves the WIFIA program’s credit policies, which influence the terms and conditions offered for WIFIA credit assistance.

•Approves applications for WIFIA credit assistance•Executes credit agreement (authority may be delegated to Assistant Administrator)

Administrator

•Approves credit subsidy estimates and gives EPA authority to commit resourcesOMB

•Reviews creditworthiness determination of projects•Recommends projects for approval to the AdministratorCredit Council

•Selects projects to invite to submit applicationsSelection

Committee

•Evaluates the eligibility of the project, borrower, and costs•Manages the letter of interest and application review process•Conducts credit, legal, and engineering due diligence on each project

•Negotiates credit agreements•Estimates the credit subsidy for each project•Monitors the WIFIA loan portfolio

WIFIA Program

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A Selection Committee chooses projects to invite to submit applications for WIFIA credit assistance. Senior Office of Water managers, including representatives from both the Office of Wastewater Management and the Office of Ground Water and Drinking Water, serve on the selection committee.

The WIFIA Program coordinates the letter of interest selection process, including evaluating the eligibility of the project, borrower, and costs. It also manages the application review process, including negotiating credit agreements to ensure that the government’s interest is protected and estimating the credit subsidy for the projects. feasibility. After loan closing, the WIFIA program monitors all the loans in its portfolio until final repayment.

4 .1 REVIEW T IMELINE

PROJECT SELECTION The project selection process, from publishing the NOFA through inviting prospective borrowers to submit an application takes approximately six (6) months. This process is the same for all prospective borrowers. After the NOFA is published, prospective borrowers typically have 60-90 days to submit a letter of interest. EPA examines and reviews letters of interest beginning immediately after the submission deadline. Evaluating and selecting projects takes another 90 days after which invitations to apply are sent to the selected projects. This process is described in detail in Section 5. Figure 4-3 shows the anticipated timeline for the project selection process.

Figure 4-3: Project Selection Process

PROJECT APPROVAL After entities are invited to apply, they should submit an application within one year. For most selected projects, applying should take significantly less time. When the application and required fee are received, EPA begins the project evaluation and approval process. Application evaluation is a cooperative process that involves back-and-forth discussion between EPA and the applicant. The goal of this process is to provide sufficient information for EPA to recommend approval and adequate negotiation to develop a term sheet. Depending on the project’s complexity and financing structure,

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evaluation and development of a term sheet should take between 90 and 180 days. After a term sheet has been agreed upon between EPA and the applicant, it must be approved by the Administrator, which should take an additional 30 days. This process is described in detail in Section 6. Figure 4-4 shows the general timeline for the project approval process.

Figure 4-4: Project Approval Process

NEGOTIATION AND CLOSING After a project is approved through the execution of the term sheet, EPA and the applicant begin the process of negotiating the final loan documents. Depending on the complexity of the agreed upon terms, the negotiations may be quick or may be extensive. This process can take between 60 and 90 days. Upon final agreement of the loan terms and drafting of the loan documents, EPA will schedule the loan closing. Figure 4-5 shows the general timeline for the negotiation and closing process.

Figure 4-5: negotiation and closing process

The WIFIA program can provide customized loan terms and work with applicants to develop innovative credit structures to help get projects off the ground. Each transaction’s review will be tailored to reflect the complexity and risk of the project’s credit. If an applicant opts for a straightforward financial, legal and technical project and generic loan characteristics, it can anticipate a shorter approval, negotiation

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and closing process. Conversely, if an applicant’s project is more complex financially, legally, and technically, and requires significant negotiations to craft mutually agreeable terms, it can anticipate a longer approval, negotiation and closing process.

Projects that may experience a shorter review and approval process have a few key attributes:

• A straightforward capital structure.

• A highly rated revenue source not dependent upon construction.

• High-value collateral.

• An active debt issuance program within an existing indenture or trust agreement.

• A willingness to accept WIFIA’s standard credit and legal terms.

• No complicating cross-cutter compliance issues.

• Project concept is conventional and relatively low risk.

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SECTION 5

P R O J E C T S E L E C T I O N This section describes the first phase of the WIFIA program application process, which includes the release of the Notice of Funding Availability (NOFA), the submission of letters of interest, the evaluation of letters of interest, and the selection of projects to invite to apply.

Prospective borrowers may contact the WIFIA program either by email (wifia@epa.gov) or by phone (202-564-2992) during this phase of the application process. In addition to answering the prospective borrower directly, the WIFIA program will compile the questions and their responses into a frequently asked questions (FAQ) document posted on its website.

5 .1 NOTICE OF FUNDING AVAILABIL ITY (NOFA) The initial phase commences with the issuance of a NOFA. A NOFA notifies the public that new funding is available, typically after funds are appropriated by Congress, and EPA is ready to accept letters of interest from prospective borrowers. EPA will publish the NOFA in the Federal Register and on the WIFIA program website (https://www.epa.gov/wifia). Each NOFA will specify the amount of funding available to support WIFIA credit assistance, EPA’s priorities for the funding round(s), the weight given to each selection criterion, and instructions for submitting a letter of interest. EPA may also include in the NOFA additional eligibility requirements, set-asides, or priorities as mandated by the appropriating legislation.

EPA may announce multiple selection rounds in a single NOFA. For each selection round, the NOFA will identify a deadline by which letters of interest must be submitted to be considered for funding in that selection round.

5 .2 LETTER OF INTEREST SUBMISSION Prospective borrowers must submit a letter of interest by the deadline articulated in the NOFA to be considered for WIFIA credit assistance in a selection round.

In the letter of interest, prospective borrowers provide the WIFIA program with sufficient information to:

• Validate the eligibility of the prospective borrower and the proposed project;

• Perform a preliminary creditworthiness assessment;

• Perform a preliminary engineering feasibility analysis; and

Project Selection Project Approval

Negotiation and Closing

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• Supply the WIFIA program with information to evaluate the project against the selection criteria defined in the NOFA.

COMPONENTS The letter of interest contains the following eight (8) sections:

1. Prospective Borrower Information: In this section, the prospective borrower provides basic information such as its legal name, address, website, employer/taxpayer identification number, Dun and Bradstreet Data Universal Number System (DUNS) number, and type of entity. In addition, it describes the project’s organizational structure, risk allocation if multiple parties are involved, and readiness to proceed.

If the project will be undertaken by an entity that is not a State or local government or an agency or instrumentality of a State or local government, or a tribal government or consortium of tribal governments, the prospective borrower must demonstrate public sponsorship for the project. Public sponsorship means that the prospective borrower can demonstrate, to the satisfaction of the EPA, that it has consulted with the affected State, local, or tribal government in which the project is located, or is otherwise affected by the project and that such government supports the proposed project. A prospective borrower can show support by including a certified letter signed by the approving State, tribal, or municipal department or similar agency; governor, mayor or other similar designated authority; statute or local ordinance, or any other means by which government approval can be evidenced.

2. Project Plan: The prospective borrower provides a general description of the project, including its name, permit number, website, location, population served, description, purpose, design features, project delivery method, and development schedule. In addition, it includes other relevant information that could affect the development of the project, such as community support, pending legislation, litigation, and permitting. Also, the prospective borrower submits project documents including preliminary engineering analysis, alternative analysis or business cases conducted, project plans and specifications, project schedule, and a system master plan, as available.

3. Project Operations and Maintenance Plan: The prospective borrower describes its plan for operating, maintaining, and repairing the project post-completion, discusses the sources of revenue used to finance these activities, and provides an estimate of the economic useful life of the project.

4. Financing Plan: The prospective borrower details the estimated eligible project costs and requested amount of the WIFIA loan. Also, it provides the sources and uses table for the construction period. The prospective borrower should discuss proposed financial structure, any existing ratings from NRSROs on the security pledged for repayment of the WIFIA loan if available, or a description of how the senior debt obligations will garner an investment-grade rating(s). It should describe the proposed credit terms for the WIFIA assistance and the its financial condition.

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In addition to the information provided in the form, the prospective borrower should provide a financial pro forma and year-end audited financial statements for the past three years, as available. A sample pro forma is provided on the WIFIA website at https://www.epa.gov/wifia/wifia-application-materials-and-resources. The pro forma should be submitted in as editable electronic files, not in PDF or "values" format.

5. Selection Criteria: The prospective borrower describes the potential policy benefits achieved through the use of WIFIA assistance with respect to each of the WIFIA program selection criteria. These criteria and their weights are enumerated in the NOFA. Appendix C of the handbook also contains a detailed discussion of the selection criteria.

6. Contact Information: The prospective borrower identifies the points of contact with whom the WIFIA program should communicate regarding the letter of interest. For the purpose of completing its evaluation, WIFIA program staff may contact a prospective borrower regarding specific information in the letter of interest.

7. Certifications: The prospective borrower certifies that it will abide by all applicable laws and regulations, including NEPA, the Federal Water Pollution Control Act, the American Iron and Steel requirements, and Federal labor standards, among others if selected to receive funding.

8. SRF Notification: The prospective borrower acknowledges that EPA will notify the appropriate SRF program in the state in which the project is located that it submitted a letter of interest and provide the submitted letter of interest and source documents to that authority. The prospective borrower may opt out of having its letter of interest and source documents shared.

Prospective borrowers should use the letter of interest form provided on the WIFIA website (https://www.epa.gov/wifia/wifia-application-materials-and-resources) to complete their letters of interest. In cases where there are differences between the guidance in this document and the guidance on the electronic form, the latter should dictate the prospective borrower’s response.

5 .3 LETTER OF INTEREST SUBMISSION Prospective borrowers must submit the letter of interest and all referenced source documents to EPA by the deadline stated in the Notice of Funding Availability (NOFA). Source documents may be draft or preliminary. Please provide the most recent version available at the time of submission. Prospective borrowers may wish to assert a business confidentiality claim covering part or all of the information included in the letter of interest form or referenced source material. Further information, including a definition of “confidential business information (CBI),” the process for asserting confidentiality, and the information EPA will require from a prospective borrower to substantiate the claim, can be found in Appendix F. Please be aware that EPA reserves the right to request substantiation at any time following a business confidentiality claim.

The documents may be submitted in two ways:

1. Email the documents as attachments to wifia@epa.gov.

2. Upload the documents to EPA’s SharePoint site. To be granted access to the SharePoint site, prospective borrowers must request access to SharePoint by emailing wifia@epa.gov.

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Requests to upload documents must be made in advance of the deadline as outlined in the NOFA.

Upon receipt, EPA will provide a confirmation email. In addition, the program will post a list of all prospective borrowers with a short project description.

5 .4 LETTER OF INTEREST EVALUATION The WIFIA program will select projects to be invited to apply based on submitted letters of interest. EPA will only select projects which are reasonably anticipated to be able to meet the eligibility requirements and for which the WIFIA program has sufficient budget authority. This helps to ensure the potential borrowers do not expend time and financial resources, including incurring fees associated with applying, for a project that is not likely to proceed to financial close.

EPA will assess letters of interest by performing an eligibility screening, a preliminary creditworthiness assessment, a preliminary engineering feasibility analysis, and an evaluation of the selection criteria.

ELIGIBILITY SCREENING Upon receipt of a letter of interest, the WIFIA program validates that the prospective borrower is an eligible entity as described Section 2.1 and the proposed project is an eligible project as described in Section 2.2. Eligible projects are concurrently reviewed for creditworthiness, engineering feasibility, and selection criteria evaluation, as described below.

PRELIMINARY CREDITWORTHINESS ASSESSMENT Following the determination of eligibility, the WIFIA program will perform a preliminary creditworthiness assessment. The preliminary creditworthiness assessment has two purposes:

• To evaluate whether the credit assistance requested by the prospective borrower has reasonable assurance of repayment.

• To estimate the amount of budget authority necessary to fund such WIFIA credit assistance.

Prospective borrowers are encouraged to provide the WIFIA program with as much information about the proposed credit request as possible in response to the letter of interest and through attachments. Whenever possible, the prospective borrower should include existing credit ratings on the proposed source of repayment. The WIFIA program will use this information to determine historic financial performance (for established entities) as well as the strength of the proposed revenue pledge by evaluating revenue and expense projections including coverage ratios and growth trends.

PRELIMINARY FEASIBILITY ANALYSIS The WIFIA program will perform a preliminary engineering review to evaluate whether the project is technically feasible based on the information submitted with the letter of interest. The purpose of this review is not to provide input on project design but to ensure the project can be completed on time and within budget. In addition, the WIFIA program will estimate the impact of compliance with federal requirements, such as NEPA, on the project cost and schedule. The WIFIA program will evaluate the reasonableness of the project development schedule, environmental review, cost estimates, and operations and maintenance plan. While additional supporting materials such as alternatives analysis or

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master plans are not required, the prospective borrower can make a stronger case for a well thought out, documented, and prioritized project by providing the WIFIA program with such information.

At the letter of interest phase, EPA will make a preliminary assessment of potential environmental impacts, what environmental assessments and consultations will need to be conducted should the proposed project be invited to apply for WIFIA funds, and make a preliminary determination of the level of NEPA assessment most applicable to the proposed project. Please refer to Appendix H for an overview of EPA’s steps to assessing the appropriate level of NEPA review.

SELECTION CRITERIA The statute requires that the WIFIA program evaluate projects using selection criteria. The statute established eleven (11) criteria, to which the implementation rule adds two (2) additional criteria. The rule also allows EPA to add criteria in a NOFA. EPA is using this authority to add one (1) additional criterion. The WIFIA selection criteria are divided into three categories that represent critical considerations for selecting projects: Project Impact, Project Readiness, and Borrower Creditworthiness. Each criterion within a category will be assigned a point value in the NOFA. For the Project Readiness and Borrower Creditworthiness categories, criteria scores are supplemented by points awarded from the preliminary engineering feasibility analysis and preliminary creditworthiness assessment, described in the preceding sections. The WIFIA program evaluates the criteria as described in Appendix C. The WIFIA program selection criteria are as follows:

PROJECT IMPACT:

1. The extent to which the project is nationally or regionally significant, with respect to the generation of economic and public benefits, such as (1) the reduction of flood risk; (2) the improvement of water quality and quantity, including aquifer recharge; (3) the protection of drinking water, including source water protection; and (4) the support of international commerce. 33 U.S.C. § 3907(b)(2)(A); 40 C.F.R. § 35.10055(a)(1).

2. The extent to which the project uses new or innovative approaches. 33 U.S.C. § 3907(b)(2)(D); 40 C.F.R. § 35.10055(a)(3).

3. The extent to which the project (1) protects against extreme weather events, such as floods or hurricanes; or (2) helps maintain or protect the environment: 33 U.S.C. § 3907(b)(2)(F); 40 C.F.R. § 35.10055(a)(4); 40 C.F.R. § 35.10055(a)(5).

4. The extent to which the project serves regions with significant energy exploration, development, or production areas: 33 U.S.C. § 3907(b)(2)(G); 40 C.F.R. § 35.10055(a)(6).

5. The extent to which a project serves regions with significant water resource challenges, including the need to address (1) water quality concerns in areas of regional, national, or international significance; (2) water quantity concerns related to groundwater, surface water, or other water sources; (3) significant flood risk; (4) water resource challenges identified in existing regional, State, or multistate agreements; and (5) water resources with exceptional recreational value or ecological importance. 33 U.S.C. § 3907(b)(2)(H); 40 C.F.R. § 35.10055(a)(7).

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6. The extent to which the project addresses identified municipal, State, or regional priorities. 33 U.S.C. § 3907(b)(2)(I); 40 C.F.R. § 35.10055(a)(8).

7. The extent to which the project addresses needs for repair, rehabilitation or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system. 40 C.F.R. § 35.10055(a)(12).

8. The extent to which the project serves economically stressed communities, or pockets of economically stressed rate payers within otherwise non-economically stressed communities. 40 C.F.R. § 35.10055(a)(13).

9. The extent to which the project reduces exposure to lead in the nation’s drinking water systems or ensures continuous compliance with contaminant limits. 40 C.F.R. § 35.10055(b).

PROJECT READINESS

1. The readiness of the project to proceed toward development, including a demonstration by the obligor that there is a reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after the date on which a Federal credit instrument is obligated for the project under [WIFIA]. 33 U.S.C. § 3907(b)(2)(J); 40 C.F.R. § 35.10055(a)(9).

2. Preliminary engineering feasibility analysis score. 33 U.S.C. § 3907(a)(2); 33 U.S.C. § 3907(a)(6); 40 C.F.R. § 35.10015(c); 40 C.F.R. § 35.10045(a).

BORROWER CREDITWORTHINESS

1. The likelihood that assistance under [WIFIA] would enable the project to proceed at an earlier date than the project would otherwise be able to proceed. 33 U.S.C. § 3907(b)(2)(C); 40 C.F.R. § 35.10055(a)(2).

2. The extent to which the project financing plan includes public or private financing in addition to assistance under [WIFIA]. 33 U.S.C. § 3907(b)(2)(B); 40 C.F.R. § 35.10055(a)(10).

3. The extent to which assistance under [WIFIA] reduces the contribution of Federal assistance to the project. 33 U.S.C. § 3907(b)(2)(K); 40 C.F.R. § 35.10055(a)(11).

4. The amount of budget authority required to fund the Federal credit instrument made available under [WIFIA]. 33 U.S.C. § 3907(b)(2)(E).

5. Preliminary creditworthiness assessment score. 33 U.S.C. § 3907(a)(1); 40 C.F.R. § 35.10015(c); 40 C.F.R. § 35.10045(a)(1); 40 C.F.R. § 35.10045(a)(4); 40 C.F.R. § 35.10045(b).

5 .5 PROJECT SELECTION Once all letters of interest for a selection round have been evaluated, the Selection Committee will select which prospective borrowers to invite to apply. The Selection Committee will choose projects from the pool of active letters of interest received before the selection round due date. The Selection Committee will select projects based on selection score, while also taking into consideration the diversity of project types and geography within the portfolio. Due to the diversity requirement, it is

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possible that higher scoring projects will be skipped in favor of lower scoring projects to ensure such diversity. There is no threshold score that must be achieved in order to be selected.

The WIFIA program will provide prospective borrowers written notification either inviting them to submit an application for WIFIA credit assistance or notifying them that they have not been selected. Selected entities will receive information about the location of the latest application materials. Prospective borrowers that are invited to apply and do not plan to submit an application for WIFIA credit assistance are asked to notify the WIFIA program immediately to allow other prospective borrowers to be invited. Prospective borrowers that were not selected will receive information for scheduling a debrief call to discuss their letter of interest.

An invitation to apply for WIFIA credit assistance does not guarantee EPA’s approval, which remains subject to a project’s continued eligibility, including creditworthiness, the successful negotiation of terms acceptable to EPA, and the availability of funds at the time at which all necessary recommendations and evaluations have been completed. However, the purpose of EPA’s letter of interest review is to pre-screen prospective borrowers to the extent practicable. In doing this, it is expected that EPA will only invite projects to apply if it anticipates that those projects can obtain WIFIA credit assistance.

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SECTION 6

P R O J E C T A P P R O V A L This section describes the process by which EPA approves projects for WIFIA credit assistance. This is the second phase of the application review process. It includes a description of the steps that prospective borrowers follow to submit an application for WIFIA credit assistance. It also describes the WIFIA program’s detailed evaluation review and approval process, which culminates in the execution of a term sheet by the Administrator.

6 .1 APPLICATION SUBMISSION The second phase of the application review process begins when a prospective borrower who has been invited to apply for WIFIA assistance submits its application. EPA anticipates that prospective borrowers will need less than one year to complete applications. The WIFIA program will only review applications submitted in response to an invitation to apply.

In the application, a prospective borrower updates information submitted in the letter of interest and provides the WIFIA program with the materials necessary to evaluate the creditworthiness of the prospective borrower and project for the proposed WIFIA credit assistance.

Applicants may wish to assert a business confidentiality claim covering part or all of the information included in the application or referenced source material. Further information, including a definition of “confidential business information (CBI),” the process for asserting confidentiality, and the information EPA will require from an applicant to substantiate the claim, can be found in Appendix F. Please be aware that EPA reserves the right to request substantiation at any time following a business confidentiality claim.

Applicants should submit completed applications that include all components on the application checklist. The completed application package, including both hard copy and electronic files, should be sent to the attention of:

Director, WIFIA Program US EPA William Jefferson Clinton West Building-room 6210 A 1301 Constitution Ave, NW Washington, DC 20004

Applicants should provide electronic files of the entire application and all exhibits on a USB drive, CD, or EPA’s SharePoint site. Exhibits IX, X, and XI should be provided as editable electronic files, not in PDF or

Project Selection Project Approval Negotiation

and Closing

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"values" format. Applicants are advised to use an express mail or courier delivery service to ensure delivery confirmation of the package.

COMPONENTS The following list outlines the elements of an application. However, it is not an exhaustive list of the items that may be required of the applicant. Additional items may be requested on a case-by-case basis. The application contains the following components:

1. Applicant Information: The applicant provides basic information such as its legal name, project name, address, website, Dun and Bradstreet Data Universal Number System (DUNS) number, and employer/taxpayer identification number. The applicant also submits information identifying and describing its organizational history, ownership, structure, and customer base. The applicant must also describe its legal authority to apply for WIFIA credit assistance and to undertake the project, and disclose any current, threatened, or pending litigation.

2. Detailed Project Information: Materials submitted under this section detail the applicant’s plan for project construction, including estimated project costs, plans and specifications or procurement documents, and project schedules. The applicant provides project development reports and documents such as the plans and specifications, contractor selection materials, alternatives analysis, system engineer’s report, environmental review status, the floodplain management plan, project management and compliance monitoring plan, and risk and mitigation strategies. Applicants requesting credit assistance under a non-recourse project finance structure include milestone schedules, and construction contract terms, including performance security. The prospective borrower submits an analysis of the risks that may be encountered during construction and steps that the prospective borrower will take to minimize those risks.

3. Operations and Maintenance Plan: The applicant submits materials supporting its plan to operate the project after construction. The operations and maintenance plan must extend throughout the entire duration of the requested WIFIA assistance and include an estimate of the associated costs and requirements. The applicant also submits materials describing contractual arrangements that it has already made or plans to make.

4. Financing Plan: The prospective borrower submits a comprehensive plan describing how the project will be financed and how financing will be repaid over the tenor of the requested WIFIA credit assistance. This includes a detailed financial model covering all periods through final maturity of the WIFIA credit assistance, the sources and seniority of other financing, a description of the dedicated sources of repayment, rate covenants, and security for the requested WIFIA credit assistance. The prospective borrower also submits a preliminary rating letter from a NRSRO indicating the possibility of the project’s senior obligations obtaining an investment-grade rating. This rating on the senior debt should include an analysis of the proposed WIFIA loan and the rating letter should specify the default risk of the WIFIA instrument as well. The applicant also provides its proposed terms and conditions for the WIFIA credit assistance.

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5. Certifications: The prospective borrower certifies that it will abide by all applicable laws and regulations, including NEPA and the Davis-Bacon wage rules, as described in Section 2.7 and in Appendix E.

PRELIMINARY OR INDICATIVE RATING As a measure of a project’s creditworthiness, WIFIA requires each applicant to provide, at the time of application, a preliminary rating opinion letter from at least one Nationally Recognized Statistical Rating Agency (NRSRO) indicating that the senior obligations of the project (which may be the federal credit instrument) have the potential to achieve an investment-grade rating.35 The WIFIA program will not consider an application complete until an applicant has provided a preliminary rating opinion letter. The preliminary rating opinion letter is a conditional credit assessment from an NRSRO that provides a preliminary indication of the project’s overall creditworthiness and specifically addresses the potential of the project’s senior debt obligations to achieve an investment-grade rating and the default risk of the WIFIA loan. Since the indicative rating is performed at an early stage of project development, the credit analysis is not expected to include comprehensive information about the loan structure. Instead, the indicative rating should provide an opinion about the potential to reach a credit rating based on a set of assumptions. The indicative rating may be based on the best information available and assumptions provided by the applicants that may change during the course of negotiation.

USE OF EXISTING RATING The WIFIA program values recently issued public credit assessments on the revenue being pledged to repay the WIFIA loan. To streamline the credit review process, the WIFIA program may accept an existing rating in place of a new, indicative rating on a case-by-case basis. In evaluating whether a previous rating letter for transactions with existing indentures can be accepted in lieu of the new preliminary rating, the WIFIA program will assess whether the following criteria are met:

• The existing credit rating is less than a year old or is actively maintained or monitored;

• The WIFIA additional debt does not materially change the credit quality of the revenue pledge;

• The existing indenture thoroughly addresses the long-term capital funding or potential sources of financing for future system investments;

• The existing credit rating opines on the lien proposed for the WIFIA loan; and

• The existing credit rating is longstanding and high investment grade.

FINAL RATING The statute requires that prior to execution of the credit agreement, each applicant provide the WIFIA program with final rating opinion letters from two NRSROs indicating that the senior obligations of the project have an investment-grade rating.36 The WIFIA implementation rule at 40 C.F.R. § 35.10040(b) further clarifies that the rating letters should provide commentary on the default risk of the WIFIA loan.

35 33 U.S.C. § 3907(a)(1)(D)(i) 36 33 U.S.C. § 3907(a)(1)(D)(ii)

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Since the final rating is issued after terms and conditions are established and when final documents are drafted, the rating should reflect the specific credit terms of the transaction.

The final rating letters must both be public ratings. The credit assessment should specifically evaluate the WIFIA loan’s default risk and should contemplate the full life of the WIFIA credit instrument

Applicants should contact the WIFIA program with any questions regarding the rating process and the requirements for preliminary and final investment-grade credit rating opinion letters on the senior obligations and the WIFIA loans. The NRSROs will be able to answer questions concerning fees, timing of assessments, information requirements, and surveillance practices associated with obtaining preliminary opinion letters, credit ratings, periodic rating updates, and credit surveillance reports.

FEES37 The WIFIA program requires each applicant to reimburse the federal government for the costs of retaining expert firms, including legal, engineering, and financial advisory services needed to review its application materials, negotiate, and close the credit agreement. These fees can be financed by the WIFIA loan as eligible project costs.

The WIFIA program will require the following fees from applicants as part of the application process. Total fees associated with the application process are estimated to be between $250,000–$500,000 per application. These fees will be updated in the Federal Register, as appropriate.

• Application Fee: For projects serving communities of less than 25,000 people, the application fee is $25,000. For all other applicants, the application fee is $100,000. The application fee is payable upon submission of the application, without which the application will not be evaluated. The application fee is non-refundable and is credited to the credit processing fee.

• Credit Processing Fee: The credit processing fee is payable upon the execution of the Credit Agreement. It reimburses EPA for costs in excess of the application fee incurred by EPA due to legal, financial, engineering, and other expert contractor services. Due to the nature of this fee, the amount is expected to vary between applicants. However, the WIFIA program estimates these costs at between $250,000–$500,000 per applicant, a portion of which may be waived at the discretion of the WIFIA program. In the event that an application is rejected or withdrawn, the applicant is still required to reimburse costs incurred to EPA.

In addition to the fees required as part of the application process, the WIFIA program may charge the following fees when deemed necessary:

• Loan Servicing Fee: The WIFIA program may retain outside assistance to perform loan servicing for WIFIA credit instruments, including credit accounting, collections, maintenance of documents, and financial reporting. The WIFIA program will charge borrowers an annual fee for loan servicing activities associated with each WIFIA credit instrument, which will be adjusted periodically based on inflation.

37 The fee rule can be found at: https://www.federalregister.gov/documents/2017/06/28/2017-13438/fees-for-water-infrastructure-project-applications-under-wifia.

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• Extraordinary Expenses Fee: In the event that a borrower experiences difficulty relating to technical, financial, or legal matters or other events (e.g., engineering failure or financial workouts) which require the WIFIA program to incur time or expenses beyond standard monitoring, EPA will be entitled to payment in full from the borrower of additional fees in an amount determined by the WIFIA program and of related fees and expenses of its independent consultants and outside counsel, to the extent that such fees and expenses are incurred directly by the WIFIA program and to the extent such third parties are not paid directly by the borrower.

• Optional Supplemental Fee: Although it is unlikely that a scenario will arise under which it would assess this fee, the WIFIA program will allow an applicant to “buy down” the budget authority required for the credit instrument. This could allow an applicant to proceed to closing in the event that sufficient budget authority is not otherwise available. This fee will only be charged upon agreement by an applicant.

6 .2 APPLICATION EVALUATION Upon receipt of a complete application, the WIFIA program will initiate its evaluation of the request for credit assistance. The WIFIA program will evaluate the feasibility of the project through engineering due diligence and the creditworthiness of the project by assessing the project’s risks and risk mitigation strategies.

The WIFIA program will retain the services of financial advisors, outside legal counsel, and engineering firms during the application evaluation through closing. Through the credit processing fee, the applicant will reimburse EPA for the cost of these services that are in excess of the application fee.

APPLICATION INTAKE The WIFIA program will first validate that applications submitted by applicants contain all of the requested elements and request missing documents, as necessary. For an application to proceed to evaluation, the applicant must pay the application fee, provide the preliminary rating opinion letter from a NRSRO, and submit a signed application. The WIFIA program will also confirm that the application continues to meet the eligibility requirements. The program will post basic information about the application on its website. Such information will include a project description, requested loan amount, total project cost, and approval status.

ORAL PRESENTATION After submitting its application, the WIFIA program will invite the applicant to give an oral presentation on the proposed project, followed by a discussion. The WIFIA program will arrange a time and location for the oral presentation and provide instructions on the structure and content of the presentation. The presentation and discussion are intended to clarify the applicant’s project plans, including the financing plan. The WIFIA program may use the discussion to request additional information and documents that were not part of the application submission and to resolve issues related to the submitted materials.

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DETERMINATION OF CREDITWORTHINESS By statute, the Administrator must determine that every project that receives a WIFIA loan is creditworthy. Therefore, an overarching goal of the creditworthiness determination process is to ensure that each project that is ultimately offered credit assistance provides a level of risk exposure that is deemed acceptable by the WIFIA program. To that end, the WIFIA program will evaluate applications for financial assistance based on prudent lending practices for the long-term holding of an illiquid asset. The Administrator will base the creditworthiness determination on a review of all of the following:

• Terms, conditions, financial structure, and security features of the proposed financing.

• Dedicated revenue source(s) securing the financing.

• Financial assumptions surrounding the proposed project.

• Financial soundness and credit history and outlook of the borrower.

• Strength of the business model and project economics.

• Technical merits and engineering risks of the proposed financing.

The following sections describe the process that will be used to assess the creditworthiness of a project in greater detail. This process involves the determination of the credit type and an assessment of key risks associated with that credit type; and an assessment of the prospective project against a general credit assessment framework.

The WIFIA program’s determination of creditworthiness must be based on realistic and probable inputs. Additionally, the WIFIA program may conduct site visits as part of the determination of creditworthiness.

DETERMINATION OF CREDIT TYPE AND CREDIT INSTRUMENT ATTRIBUTES

Given the WIFIA program’s ability to accommodate a number of different types of applicants and uses of funds, the determination of creditworthiness will include an assessment of each application in order to develop a clear understanding of the following:

• The applicant, including its credit history and structure.

• The proposed project, including any risks that will be especially relevant.

• The source or sources of repayment.

These characterizations will allow the WIFIA program to tailor its assessment of creditworthiness based on the proposed credit instrument’s specific credit attributes and the corresponding risk exposures associated with those attributes. The WIFIA program anticipates evaluating balance sheet/general recourse corporate borrowings, public financings, and non-recourse borrowing/project financings, and will conduct financial and risk analyses based on the associated criteria. The following section outlines the framework that will be used to assess each application for credit assistance.

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CREDIT ASSESSMENT CRITERIA

In general, the WIFIA program will review every proposed credit instrument based on a framework that will focus on the five categories outlined below. As noted above, each project will have exposure to its own distinctive combination of risks and each application will be assessed with a focus on its specific risks. The descriptions that follow provide examples of assessment criteria, but are not meant to be an exhaustive list:

• Financial Strength: Each proposed use of funds will include a detailed financial plan and projection of future cash flow generation. The WIFIA program will verify that the project is expected to produce sufficient revenues to service the project's debt obligations through final maturity. Projects must demonstrate adequate liquidity and debt service coverage under the financial modeling assumptions and reasonable sensitivity cases. The WIFIA program may consider the following criteria:

o Each proposed use of funds should be financially sound and offer a projection of revenue generation based upon reasonable assumptions that would provide sufficient coverage to repay the proposed credit instrument.

o By statute, the credit instrument must be repayable in whole or in part from a dedicated source.

o The capital structure for a project receiving WIFIA credit assistance should allow for adequate net cash flow after meeting all necessary obligations to ensure that the credit instrument is insulated from any unexpected events.

• Business/Economic Considerations: Each type of credit will be influenced by its individual business model, the product/services delivered to customers, and the economic conditions at the site of the proposed use of funds. The WIFIA program may consider the following in the assessment of the business characteristics and the local economy:

o The structure of the applicant’s business model, including an analysis of the product or service being delivered and the appropriateness of rates with respect to the income levels of the population served.

o The predictability of the applicant’s revenues, which may include a review of offtake agreements, the service territory, or the franchise, as applicable.

o The service area’s resource endowments, long-term economic planning, economic growth, labor force trends, and ability to withstand economic cycles.

• Management: The WIFIA program will evaluate the applicant and any key counterparties, such as sponsors, contractual partners, project management, and design and construction teams based on their experience, ability to work as a team, and ability to deliver upon the proposed financing. In its evaluation, it may consider the following criteria:

o The applicant and key counterparties demonstrate technical, managerial, and financial capacity to perform their respective responsibilities within the proposed use of funds.

o All participants have sufficient assets to meet their obligations.

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o All participants have a demonstrable record of success.

o Management is capable of abiding by all relevant federal, state, and local regulations during the pre-construction and construction process, and during operation.

o If multiple counterparties exist, parties share the balance of risk appropriately.

• Engineering Considerations: The WIFIA program will assess every proposed use of funds for any pre-construction risk, construction risk, and technology risk through the engineering due diligence process described below.

• Loan Specific Factors: The WIFIA program will assess an applicant’s other existing and proposed credit instruments based on the terms and conditions and attendant risk to the WIFIA credit instrument. It may include the following in its assessment:

o The loan tenor, repayment profile, and lien priority of the proposed credit instrument, given the risk profile of the credit assistance.

o The strength of the proposed security features such as reserve funds, rate covenants, and additional indebtedness restrictions.

These categories are overarching and provide a general framework for the creditworthiness assessment of every application which can be adjusted to fit the risk profile of each proposed project. Following the assessment of each application based on the overarching categories, and the more detailed analysis guided by the specific attributes of the proposed project, the WIFIA program will make an initial determination of creditworthiness.

ENGINEERING DUE DILIGENCE The WIFIA program will assess the technical soundness of the project by reviewing project design plans, specifications, procurement documents, technical reports and other associated documents. These should be developed in accordance with professional standards and federal, state, and local requirements. The due diligence will include the following:

• Technical Soundness: The proposed project technology should be appropriate for its intended use and consistent with the scope proposed in the letter of interest. Technical feasibility should be demonstrated based on detailed engineering information. The WIFIA program will assess the overall constructability and operability of the proposed project and that project plans and design assumptions adhere to industry standards. The WIFIA program assessment does not relieve the prospective borrower of responsibility for the project design. For Alternative Project Delivery methods, such as Design-Build or Construction Manager-at-Risk, the WIFIA program will review procurement documents for technical soundness in lieu of detailed design plans.

• Technical Risk Factors: The project should demonstrate protection from construction completion risk. The WIFIA program will assess potential construction and operation risks and associated mitigation strategies. The WIFIA program will also document additional technical reviews a project is expected to incur, such as state construction permit reviews, which further mitigates technical risk.

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• Construction Cost Estimate Assessment: Estimated project costs should be reasonable and eligible. The WIFIA program will assess the suitability of the cost estimating methodology and unit costs as compared to the project scope and industry standards. The cost estimate should also include adequate contingencies as compared to the local market and escalations as appropriate.

• Construction Schedule Assessment: The project schedule should be reasonable. The WIFIA program will assess the adequacy of the duration of the project as compared to the design scope and project plan. In addition, the WIFIA program will review the schedule to ensure that adequate time has been allotted for environmental permits and crosscutter compliance.

• Federal Requirement Compliance: The project should comply with applicable federal requirements, including NEPA. The WIFIA program will review application materials and work with prospective borrowers to make NEPA determinations, conduct consultations with other agencies, and otherwise ensure compliance. Please refer to Appendix H for an overview of EPA’s steps to assessing the appropriate level of NEPA review.

• Operation and Maintenance Plan Review: Per statute, the applicant must have an operation and maintenance plan that reasonably accounts for the expected cost of operating and maintaining the project so that the project is fully functional over a time period equal or greater than the length of the proposed credit assistance. The WIFIA program will assess the prospective borrower’s plan and estimated useful life of the project against industry standards for adequacy.

• Procurement Documents: Procurement documents should have a complete statement of work to be performed and a clear explanation of the basis and method for awarding the contract. In addition, the WIFIA program will review these documents to ensure that federal requirements, such as David-Bacon and AIS are appropriately incorporated.

• System Condition Assessment: When the WIFIA debt represents a material portion of the overall debt load on the system and/or substantially influences the prospective borrower’s overall credit profile, the WIFIA program will ensure that the prospective borrower has adequately planned for addressing system improvement needs during the repayment period.

The WIFIA program may conduct site visits during the application process to complete these reviews.

TERM SHEET DEVELOPMENT The term sheet is a contractual agreement between EPA and the applicant that sets forth certain business terms and conditions of WIFIA credit assistance for the project, including statutory requirements. Upon reviewing the creditworthiness of the application and completing engineering due diligence, the WIFIA program may propose terms and conditions to the applicant. The applicant and the WIFIA program will negotiate these terms and conditions until a mutually agreeable preliminary term sheet has been developed.

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CONTENTS

The term sheet will include terms required for WIFIA credit assistance, which are described in the statute38 and Section 3 of this document. The term sheet will also include additional basic terms and conditions related to EPA’s provision of credit assistance that can materially influence the creditworthiness of the project. Generally, the term sheet will include terms such as:

• Parties to the agreement (e.g., the lender and the borrower)

• Type of credit instrument (i.e., secured loan)

• Description of the project

• Estimated total project costs and total WIFIA-eligible project costs

• Maximum amount of WIFIA credit assistance

• Method for establishing the interest rate

• Estimated final maturity date

• Source of repayment and security, including lien structure and WIFIA credit instrument priority

• Requirements to reimburse the WIFIA program for credit processing fees

• Conditions for execution of a credit agreement and disbursement

• Auditing requirements

• Covenants such as limitations on additional bonds, minimum coverage ratios, and any required reserve funds

• Projected disbursement and repayment schedule

All parties will assess the preliminary term sheet during the project recommendations step, as described below in Section 6.3. The preliminary term sheet may be modified at any point before the Administrator approves the application for WIFIA credit assistance.

CALCULATION OF CREDIT SUBSIDY COST As the final step of the evaluation process, the WIFIA program will calculate the range of credit subsidy cost of the WIFIA credit assistance based on the results of the creditworthiness evaluation and the terms and conditions agreed upon by the applicant and the WIFIA program. This subsidy calculation will determine the amount of budget authority that is necessary to obligate for the project. This calculation is subject to review and approval by OMB.

6 .3 PROJECT RECOMMENDATIONS Following the evaluation step, the WIFIA program will summarize its assessment of the application and provide a recommendation for approval in a report and presentation for the Credit Council’s

38 33 U.S.C. § 3908

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consideration. The Credit Council’s role is to advise the Program Director regarding the creditworthiness of the applicant and whether it provides adequate assurance of timely repayment. It will make a recommendation to approve or deny an application for WIFIA credit assistance based on the applicant’s creditworthiness and the project’s conformance to the WIFIA program’s federal objectives, risk appetite, and mission.

6 .4 WIFIA CREDIT ASS ISTANCE APPR OVAL The Credit Council will provide a recommendation to the Administrator, who retains the final authority for approval of WIFIA assistance. The Administrator approves a project by executing the term sheet developed during the evaluation process. The term sheet obligates budget authority and binds EPA and the applicant to the specified terms. Nevertheless, the term sheet does not guarantee WIFIA credit assistance, and remains subject to negotiation and execution of the credit agreement.

Prior to issuing a term sheet, the WIFIA program will confirm that all prerequisites for the obligation of funds have been satisfied, including the following:

• Submission of the preliminary rating opinion letter.

• The project’s receipt of its Record of Decision (ROD), Finding of No Significant Impact (FONSI), or Categorical Exclusion under NEPA.

• Compliance with other federal laws, regulations and applicable planning requirements.

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SECTION 7

N E G O T I A T I O N A N D C L O S I N G This section describes the final phase of the application approval process – negotiation and closing – during which the WIFIA program will finalize the terms of credit assistance to an applicant. The section outlines the development of the credit agreement, negotiations, and financial close.

7 .1 CREDIT AGREEMENT DEVELOPMENT The credit agreement is the authoritative agreement between EPA and the borrower. It specifies all terms and conditions of the credit assistance and authorizes the disbursement of WIFIA credit assistance to the project.

The WIFIA program and the applicant will negotiate the specific language of the credit agreement to accurately represent WIFIA program requirements. The WIFIA program will seek to structure the final credit agreement in a way that conforms in all material respects to the terms of the term sheet. To the extent that deviations are required, the WIFIA program may need to modify the term sheet. In such circumstances, the WIFIA program would re-evaluate the project’s creditworthiness, assess the availability of additional budget authority if required, and the project would follow the same approval processes as a new application. The timeframe for developing the credit agreement is dependent on the complexity of the agreement and progress of the negotiations.

CONTENTS The credit agreement will include both standard provisions and transaction-specific provisions. Depending upon the nature of the transaction, additional documents, such as an inter-creditor agreement, may also be necessary.

In addition to the contents of the term sheet, credit agreements will generally include the following:

• Security features and additional terms

• Detailed description of pledged security

• Flow of funds

• Repayment terms, including amortization schedule and final maturity

• Representations and warranties

Project Selection

Project Approval

Negotiation and Closing

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• Borrower covenants (e.g., rate covenants)

• Annual disbursement schedule and conditions for draws

• Financial plan requirements

• Monitoring and reporting requirements

The credit agreement will also include the form of requisition for disbursements and the form of the note. Each WIFIA applicant must execute a note evidencing the requirement to repay the loan.

7 .2 CLOSING For the WIFIA program to execute the credit agreement and disburse funds, the applicant must satisfy at a minimum any requirements set forth in the term sheet. Also, the applicant must have two investment-grade ratings on the senior debt that include a discussion on the default risk of the WIFIA loan, as described in Section 6.1. If the WIFIA debt is intended to be the senior debt, it must receive two investment-grade ratings. Prior to closing a WIFIA credit agreement, the applicant must submit updates to both the financial plan and the project management and monitoring plan. The applicant must also submit for approval final project plans, specifications, and contract documents.

The WIFIA program may request to review and approve, as appropriate, all related project documents, including but not limited to design-build contracts, concession agreements, development agreements, financing agreements, and funding agreements with third parties.

The WIFIA program will schedule the closing once all of the closing documentation has been finalized and it confirms that all conditions precedent have been met. At closing, the Administrator or his designee, and the applicant will execute the credit agreement, which is the binding legal document that allows the applicant to receive WIFIA funds. Upon execution of the credit agreement, the applicant, now a borrower, must pay the credit processing fee, described in Section 6.1. The WIFIA program will post the borrower’s name under a list of borrowers on the WIFIA program’s website soon after closing.

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SECTION 8

P O S T - C L O S I N G A C T I V I T I E S A N D M O N I T O R I N G Following closing, borrowers must meet several requirements to receive funding and remain in compliance with the credit agreement. This section describes the post-closing activities involving WIFIA borrowers in three categories: disbursements, loan servicing, and loan monitoring. The executed credit agreement will identify specific requirements pertaining to each credit instrument.

8 .1 DISBURSEMENTS Prior to any disbursement, all conditions precedent to funding must be satisfied. The borrower may begin submitting eligible project costs for reimbursement following closing. In order to receive a disbursement, borrowers must submit a requisition form that will require borrowers to verify continued compliance with the credit agreement. The requisition form may include verification that the disbursement is being made against incurred eligible project costs, confirmation that there have been no changes to the project plan or any material events, and confirmation that the representations and warranties included in the credit agreement are still true and correct, among other items.

8 .2 LOAN SERVICING The WIFIA program may retain outside assistance to perform loan servicing for WIFIA credit instruments, including credit accounting, collections, maintenance of documents, and financial reporting. The WIFIA program may charge borrowers an annual fee for loan servicing activities associated with each WIFIA credit instrument, which will be adjusted periodically based on inflation.

8 .3 LOAN MONITORING EPA is required to operate the WIFIA program under a robust management and oversight structure and to monitor it in terms of programmatic goals and performance within acceptable risk thresholds. In order to accomplish these goals, the WIFIA program performs loan monitoring functions using a variety of tools at its disposal. The following subsections describe the purpose of these functions, as well as the manner in which the WIFIA program plans to implement these requirements.

LOAN MONITORING FUNCTIONS The WIFIA program monitors the credit instruments in its portfolio using three key functions: credit risk monitoring, compliance management and monitoring, and program evaluation. These functions assess different borrower or program characteristics and are each an essential part of the WIFIA program’s loan monitoring activities.

CREDIT RISK MONITORING

The WIFIA program monitors the credit risk of each loan within its portfolio, which enables it to quickly detect financial deterioration and changes in the credit risk of WIFIA program borrowers. By quickly detecting deterioration in a borrower’s risk profile, the WIFIA program may make informed decisions to address weaknesses and strengthen its position, or take preventative measures to minimize the risk

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posed to the WIFIA program. Annually, the WIFIA program must update each credit instrument’s credit risk assessment and recalculate its federal subsidy costs.

COMPLIANCE MANAGEMENT AND MONITORING

The WIFIA program ensures its integrity through compliance management and monitoring. Compliance management and monitoring is the process through which the WIFIA program verifies that borrowers are abiding by the terms of the credit agreement and prevailing laws and regulations. The WIFIA program will verify that borrowers are implementing projects in a manner that is consistent with the objectives stated in their applications and supports the WIFIA program’s mission. Borrowers are required to remain in compliance with federal requirements such as the American Iron and Steel statutory requirement, the Davis-Bacon wage requirement, environmental statutes and other requirements as set forth in the credit agreement. As part of compliance management, the WIFIA program will review and approve project-related documents, as appropriate. Such documents may include, but are not limited to, new or revised construction plans and specifications, start-up and performance testing plans, and operations and maintenance plans.

PROGRAM EVALUATION

Program evaluation uses measurement and analysis to answer specific questions about how well a program is achieving its outcomes and why. Program evaluation will provide a method for determining the benefits and impacts of WIFIA projects, including economic, environmental and public health benefits. The WIFIA program must perform periodic program evaluations to assess whether the WIFIA program is achieving policy goals while mitigating risk and costs to the taxpayer. As such, the WIFIA program will collect data from borrowers on an annual basis. The WIFIA program may collect data on three levels:

• Outputs: Goods and services delivered as a result of the WIFIA credit assistance.

• Outcomes: Changes or benefits resulting from outputs.

• Impacts: Long-term socioeconomic, environmental, and public health effects of the WIFIA program.

LOAN MONITORING TOOLS

PERIODIC REPORTING

The WIFIA program requires that borrowers submit financial condition reports in order to (i) provide an oversight tool for ensuring each borrower’s compliance with the provisions of the credit agreement, (ii) monitor the overall status of the project and the WIFIA program, and (iii) assist it in identifying any changes to the credit risk posed to the federal government under individual credit agreements. WIFIA credit agreements will specify scheduled annual, quarterly, and project milestone reporting requirements, as well as any other periodic reporting requirements.

As part of its oversight and monitoring of WIFIA projects, the WIFIA program will routinely update its information on credit quality, construction schedules, legal issues, revenue forecasts, financial projections, and project performance. Accordingly, borrowers will be required by covenant in the WIFIA credit agreement to provide ongoing financial and project information not only during construction, but

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so long as the WIFIA credit instrument is outstanding and/or until the debt obligation to the federal government is fully repaid. In each credit agreement, EPA will specify the required ongoing documentation and the frequency of such information requests.

The WIFIA program’s oversight and monitoring may include periodic status meetings with the borrower, reviews by the independent engineer (if applicable) and/or other relevant reports, and site visits (described below). Additionally, all borrowers must notify the WIFIA program of material events that could affect project development or the credit quality of the project.

SITE VISITS

The WIFIA program will conduct site visits following the execution of the credit agreement. These site visits will monitor progress made by WIFIA program borrowers, including ongoing construction. Any risks or issues identified during site visits will be documented and used to update the EPA’s ongoing risk assessment of the borrower.

HEIGHTENED MONITORING

As necessary, the WIFIA program will be authorized by the credit agreement to commence increased monitoring and reporting to ensure the continued credit quality of the project and minimize the federal government’s risk. The purpose of such heightened monitoring activities will be to address problems quickly and efficiently and return the project to expected performance. Borrowers subject to such heightened monitoring requirements may be subject to additional reporting requirements, and/or expenses for consultants and fees as documented in the credit agreement.

TABLE 8-1: OVERSIGHT AND MONITORING DOCUMENTATION

Example of Loan Monitoring Documentation* Annual Financial Condition Report

• Audited financial statements • Updates to the project financing plans • Updated budget and cash flow projections • Sources and uses of funds • Project schedules • Operating statistics • Other significant updates • Rating opinion letter (as available)

Quarterly Financial Condition Report • Key financial ratios • Financial statements • Construction progress • Significant updates • Management updates

Legislative Compliance Certifications Timely Updates on Material Events Programmatic Data

• Capital Improvement Plan data *Specific reporting requirements will be negotiated with the WIFIA program and stated explicitly in the credit agreement.

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A P P E N D I X A : A C R O N Y M S Table A-1 defines acronyms that are commonly used throughout this handbook.

TABLE A-1: ACRONYMS

Acronym Definition

AIS American Iron and Steel CC Credit Council C.F.R. Code of Federal Regulations EA Environmental Assessment EID Environmental Information Document EIS Environmental Impact Statement EPA United States Environmental Protection Agency FAST Fixing America’s Surface Transportation Act of 2015 FCRA Federal Credit Reform Act of 1990 FONSI Finding of No Significant Impact LOI Letter of Interest NEPA National Environmental Policy Act of 1969 NOFA Notice of Funding Availability NRSRO Nationally Recognized Statistical Rating Organization OGC Office of General Counsel OMB Office of Management and Budget OW Office of Water P.L. Public Law PRA Paperwork Reduction Act ROD Record of Decision U.S.C. United States Code WIFIA Water Infrastructure Finance and Innovation Act of 2014 WRRDA Water Resources Reform and Development Act of 2014

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A P P E N D I X B : D E F I N I T I O N S Table B-1 defines relevant terms employed throughout this handbook.

TABLE B-1: DEFINITIONS

Term Definition

Administrator Administrator of the U.S. Environmental Protection Agency Applicant An entity selected to submit an applicant for WIFIA credit assistance following

selection by the WIFIA Selection Committee Borrower An entity that has obtained an executed credit agreement for WIFIA credit

assistance Credit Agreement A contractual agreement between EPA and the prospective borrower (and the

lender, if applicable) that formalizes the terms and conditions established in the term sheet (or conditional term sheet) and authorizes the execution of a secured loan or loan guarantee

Credit Subsidy Cost “Cost” under §502(5) of the Federal Credit Reform Act of 1990 (2 U.S.C. § 661a(5)), which is the net present value at the time the obligation is entered into. The credit subsidy cost for a given project is calculated by EPA in consultation with OMB. The credit subsidy cost must be less than the unobligated budget authority that has been appropriated by Congress to date.

Federal Credit Instrument A secured loan or loan guarantee authorized to be made available with respect to a project

Investment-Grade Rating A rating of BBB minus, Baa3, bbb minus, BBB (low), or higher assigned by a rating agency to project obligations

Loan Guarantee Any guarantee or other pledge by the Administrator to pay all or part of the principal of and interest on a loan or other debt obligation issued by a borrower and funded by a lender

Nationally Recognized Statistical Rating Organization

A credit rating agency identified and registered by the Office of Credit Ratings in the Securities and Exchange Commission under 15 U.S.C. § 78o-7

Project Obligation Any note, bond, debenture, or other debt obligation issued by a borrower in connection with the financing of a project

Prospective Borrower An entity that is contemplating or is in the process of undertaking the application process.

Publicly Sponsored The prospective borrower can demonstrate, to the satisfaction of the Administrator, that the prospective borrower has consulted with the affected State, local, or tribal government in which the project is located, or is otherwise affected by the project, and that such government supports the proposed project

Secured Loan A direct loan or other debt obligation issued by a borrower and funded by the Administrator in connection with the financing of a project

State Infrastructure Financing Authority

State entity established or designated by the Governor of a State to receive a capitalization grant provided by, or otherwise carry out the requirements of, title VI of the Federal Water Pollution Control Act (33 U.S.C. § 1381 et. seq.) or section 1452 of the Safe Drinking Water Act (42 U.S.C. § 300j–12). Commonly known as the State Revolving Fund (SRF) program.

Substantial Completion The stage in the progress of the project when the project or designated portion thereof is sufficiently complete in accordance with the contract documents so that the project or a portion thereof can be used for its intended use

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Term Definition

Term Sheet A contractual agreement between the EPA and the prospective borrower (and the lender, if applicable) that sets forth the key business terms and conditions of a federal credit instrument. Execution of this document represents a legal obligation of budget authority

WIFIA Credit Assistance A secured loan or loan guarantee authorized to be made available under WIFIA

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A P P E N D I X C : S E L E C T I O N C R I T E R I A

WHAT ARE THE SELECTION CRITERIA AND HOW ARE THEY USED? The WIFIA program is required by statute to evaluate projects using selection criteria as established by statute and regulation. The selection criteria are divided into three categories that represent critical considerations for selecting projects: Project Impact, Project Readiness, and Borrower Creditworthiness. Following analysis by WIFIA program staff, a final score is calculated for each project. Projects will be selected in order of score, subject, however, to the requirement to ensure a diversity of project types and geographical locations. Due to this requirement it is possible that higher scoring projects will be skipped in favor of lower scoring projects to ensure such diversity. Information regarding how EPA will consider each selection criterion is announced in each NOFA. For the Project Readiness and Borrower Creditworthiness categories, criteria scores are supplemented by points awarded from the preliminary engineering feasibility analysis and preliminary creditworthiness assessment, described above in section 5.4.

The WIFIA program selection criteria are as follows:

PROJECT IMPACT

1. The extent to which the project is nationally or regionally significant, with respect to the generation of economic and public benefits, such as (1) the reduction of flood risk; (2) the improvement of water quality and quantity, including aquifer recharge; (3) the protection of drinking water, including source water protection; and (4) the support of international commerce. 33 U.S.C. § 3907(b)(2)(A); 40 C.F.R. § 35.10055(a)(1).

2. The extent to which the project uses new or innovative approaches. 33 U.S.C. § 3907(b)(2)(D); 40 C.F.R. § 35.10055(a)(3).

3. The extent to which the project (1) protects against extreme weather events, such as floods or hurricanes; or (2) helps maintain or protect the environment. 33 U.S.C. § 3907(b)(2)(F); 40 C.F.R. § 35.10055(a)(4); 40 C.F.R. § 35.10055(a)(5).

4. The extent to which a project serves regions with significant energy exploration, development, or production areas. 33 U.S.C. § 3907(b)(2)(G); 40 C.F.R. § 35.10055(a)(6).

5. The extent to which a project serves regions with significant water resource challenges, including the need to address (1) water quality concerns in areas of regional, national, or international significance; (2) water quantity concerns related to groundwater, surface water, or other water sources; (3) significant flood risk; (4) water resource challenges identified in existing regional, State, or multistate agreements; and (5) water resources with exceptional recreational value or ecological importance. 33 U.S.C. § 3907(b)(2)(H); 40 C.F.R. § 35.10055(a)(7).

6. The extent to which the project addresses identified municipal, State, or regional priorities. 33 U.S.C. § 3907(b)(2)(I); 40 C.F.R. § 35.10055(a)(8).

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7. The extent to which the project addresses needs for repair, rehabilitation or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system. 40 C.F.R. § 35.10055(a)(12).

8. The extent to which the project serves economically stressed communities, or pockets of economically stressed rate payers within otherwise non-economically stressed communities. 40 C.F.R. § 35.10055(a)(13).

9. The extent to which the project reduces exposure to lead in the nation’s drinking water systems or ensures continuous compliance with contaminant limits. 40 C.F.R. § 35.10055(b).

PROJECT READINESS

1. The readiness of the project to proceed toward development, including a demonstration by the obligor that there is a reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after the date on which a Federal credit instrument is obligated for the project under [WIFIA]. 33 U.S.C. § 3907(b)(2)(J); 40 C.F.R. § 35.10055(a)(9).

2. Preliminary engineering feasibility analysis score. 33 U.S.C. § 3907(a)(2); 33 U.S.C. § 3907(a)(6); 40 C.F.R. § 35.10015(c); 40 C.F.R. § 35.10045(a).

BORROWER CREDITWORTHINESS

1. The likelihood that assistance under [WIFIA] would enable the project to proceed at an earlier date than the project would otherwise be able to proceed. 33 U.S.C. § 3907(b)(2)(C); 40 C.F.R. § 35.10055(a)(2).

2. The extent to which the project financing plan includes public or private financing in addition to assistance under [WIFIA]. 33 U.S.C. § 3907(b)(2)(B); 40 C.F.R. § 35.10055(a)(10).

3. The extent to which assistance under [WIFIA] reduces the contribution of Federal assistance to the project. 33 U.S.C. § 3907(b)(2)(K); 40 C.F.R. § 35.10055(a)(11).

4. The amount of budget authority required to fund the Federal credit instrument made available under [WIFIA]. 33 U.S.C. § 3907(b)(2)(E).

5. Preliminary creditworthiness assessment score. 33 U.S.C. § 3907(a)(1); 40 C.F.R. § 35.10015(c); 40 C.F.R. § 35.10045(a)(1); 40 C.F.R. § 35.10045(a)(4); 40 C.F.R. § 35.10045(b).

As noted in Section 5.2 of the Program Handbook, prospective borrowers will first submit a letter of interest with a rationale for why a specific project meets the selection criteria above.

HOW DO PROSPECTIVE BORROWERS ADDRESS SELECTION CRITERIA? In Section E of the letter of interest, the prospective borrower describes the potential benefits to be achieved using WIFIA assistance with respect to each of the selection criteria. Because the selection criteria encompass a wide range of factors, it is not expected that most projects will be able to fully address all of them. However, the prospective borrower should make its best case to EPA and

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demonstrate how funding its projects will help the WIFIA program meet its goals. In responding, the prospective borrower should provide specific details, and, when applicable, reference supporting documentation.

PROJECT IMPACT

CRITERION 1: NATIONAL OR REGIONAL SIGNIFICANCE The extent to which the project is nationally or regionally significant, with respect to the generation of economic and public benefits, such as (1) the reduction of flood risk; (2) the improvement of water quality and quantity, including aquifer recharge; (3) the protection of drinking water, including source water protection; and (4) the support of international commerce. 33 U.S.C. § 3907(b)(2)(A); 40 C.F.R. § 35.10055(a)(1).

EPA will evaluate the quality and extent to which the project can benefit the economy and public for a region or the nation. Projects can be differentiated based on their impact on each variable as well as the scope of their impact.

Prospective borrowers can demonstrate improvement to economic conditions by providing estimates of expected economic benefits such as new jobs, tax revenues, keeping or attracting new industries, increased commerce, etc. Public benefits can include improving water quality; increasing reliability of drinking water delivery, quality and access; reducing lead contamination from drinking water; reducing flood risk; protecting source water; supporting international commerce; etc. In addition, if a project encompasses the regionalization of systems to increase efficiencies and reap the benefits of economies of scale, that can be considered both an economic and public benefit.

For purposes of this criterion, a region can consist of a service area within a municipality, portions of a municipality, multiple neighboring municipalities, a state or multiple states. In addition, for a project to impact national economic or public benefits, the letter of interest should demonstrate how the project or components of the project can benefit regions which are not directly served by the project. Projects that have a net negative impact on the economy and/or the public will be eliminated from further consideration.

Prospective borrowers should provide information about the following when responding to this criterion:

• Project elements that provide economic and public benefits.

• How the project or components of the project can benefit regions which are not directly served by the project.

• How the project or components of the project can benefit the economy or public of multiple states or the nation.

CRITERION 2: NEW OR INNOVATIVE APPROACHES The extent to which the project uses new or innovative approaches. 33 U.S.C. § 3907(b)(2)(D); 40 C.F.R. § 35.10055(a)(3).

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EPA will evaluate the depth and degree of how the project uses new or innovative approaches such as, but not limited to:

• Use of renewable or alternate sources of energy.

• Use of energy efficient parts or systems for a significant portion of the project.

• Use of green infrastructure elements.

• Development of alternate sources of drinking water and alternate water supplies through aquifer recharge, water recycling or desalination.

• Development of distribution systems for recycled water.

• Development of biosolids or other renewable resources.

• Addressing emerging and yet unregulated contaminants or other water quality issues.

• Use of new or enhanced technologies that improve drinking water treatment efficacy and/or reliability.

• A novel application of an existing method or technology.

Prospective borrowers should provide information about the following when responding to this criterion:

• Does the project incorporate any new or innovative approaches or technologies?

• Has the new or innovative approach or technology been pilot tested?

• Has the new or innovative approach or technology been implemented at full scale levels?

• Does the project incorporate approaches or technologies that have the potential to significantly improve standard operations within the water and wastewater industries?

CRITERION 3: PROTECTION AGAINST EXTREME WEATHER EVENTS The extent to which the project (1) protects against extreme weather events, such as floods or hurricanes; or (2) helps maintain or protect the environment: 33 U.S.C. § 3907(b)(2)(F); 40 C.F.R. § 35.10055(a)(4); 40 C.F.R. § 35.10055(a)(5).

EPA will evaluate projects on the depth and degree to which they protect against extreme weather events, such as floods or hurricanes, or helps maintain or protect the environment.

Extreme weather impacts can include:

• Drought: Reduced groundwater recharge, lower lake and reservoir levels, changes in seasonal runoff and loss of snowpack.

• Water Quality Degradation: Low flow conditions and altered water quality, saltwater intrusion into aquifers, altered surface water quality.

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• Floods: High flow events & flooding, flooding from coastal storm surges.

• Ecosystem Changes: Loss of coastal landforms/wetlands, increased fire risk and altered vegetation.

• Service Demand and Use: Volume and temperature challenges, changes in water demand, changes in energy sector needs, changes in energy needs of utilities.

Examples of project elements that can protect against extreme weather events include the following:

• Mitigation planning and risk assessments.

• Flood protection or mitigation.

• Green infrastructure which address flooding, drought, urban heat island effects, energy demand, protection of coastal areas, etc.

• Backup power.

• Emergency response plans.

• Enhanced infrastructure resiliency.

• Water recycling and reuse.

• Managed aquifer recovery.

EPA will ensure that WIFIA-funded projects include enhanced resiliency against flood, and do not exacerbate flood risk upstream, downstream, to adjacent properties, or to populations relying on facility services. WIFIA-funded projects will be required to meet applicable State, local, Tribal, and Territorial standards for flood risk and floodplain management, as well as Executive Order 11988 on floodplain management. Prospective borrowers are encouraged to describe how their project will meet applicable standards in their response to this selection criterion or reference where such information may be found elsewhere in their letter of interest.

Prospective borrowers should provide information about the following when responding to this criterion:

• Does the project address extreme weather events, such as 100-year floods or natural disasters that have occurred in the past?

• Does the project address extreme weather events, such as the 500-year flood and/or climate change impacts for at least a 20-year planning period?

• How does the prospective borrower intend to meet State, local, Tribal, and Territorial standards for flood risk and floodplain management?

• How does the project help improve or maintain the environment?

CRITERION 4: SERVES ENERGY EXPLORATION OR PRODUCTION AREAS The extent to which the project serves regions with significant energy exploration, development, or

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production areas: 33 U.S.C. § 3907(b)(2)(G); 40 C.F.R. § 35.10055(a)(6).

EPA will evaluate the project on the depth and degree to which it helps support a population in a region with energy exploration, development, or production areas.

For purposes of this criterion, a region can consist of a service area within a municipality, portions of a municipality, multiple neighboring municipalities, a state or multiple states.

Prospective borrowers should provide information about whether or not a project serves a population in a region with energy exploration, development, or production areas.

CRITERION 5: SERVES REGIONS WITH WATER RESOURCE CHALLENGES The extent to which a project serves regions with significant water resource challenges, including the need to address (1) water quality concerns in areas of regional, national, or international significance; (2) water quantity concerns related to groundwater, surface water, or other water sources; (3) significant flood risk; (4) water resource challenges identified in existing regional, State, or multistate agreements; and (5) water resources with exceptional recreational value or ecological importance. 33 U.S.C. § 3907(b)(2)(H); 40 C.F.R. § 35.10055(a)(7).

EPA will evaluate each project on the depth and degree to which it serves regions with significant water resource challenges. Water resource challenges can include:

• Water quality concerns in areas of regional, national, or international significance.

• Water quantity concerns related to groundwater, surface water, or other resources.

• Significant flood risk.

• Water resource challenges, including reducing exposure to lead and other contaminants, that are identified in existing regional, state, or multistate agreements.

• Projects dealing with water resources with exceptional recreational value or ecological importance.

For purposes of this criterion, a region can consist of a service area within a municipality, portions of a municipality, multiple neighboring municipalities, a state or multiple states. Where a region’s water resource challenges include source water quality, projects can address the challenge at the source or within the drinking water system. Exceptional recreational value considers the economic value of recreation activities and the scarcity of alternative water resources available for similar types of recreation. Exceptional ecological importance can include water bodies designated as Tier 3 Anti Degradation water bodies pursuant to the Clean Water Act, water bodies designated by states or EPA as Outstanding National Resource Waters (or similar distinction), national wild and scenic rivers, National Estuaries, and areas of multistate collaboration, such as the Long Island Sound.

Prospective borrowers are encouraged to demonstrate how the proposed project addresses a water resource challenge and, if possible, how much of the challenge is expected to be alleviated by the project. Prospective borrowers should also discuss how the water resource challenge affects their ability

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to serve their customers, maintain or improve service levels, and/or poses a significant risk to human health or life.

Prospective borrowers should provide information about the following when responding to this criterion:

• How does the project address a water resource challenge?

• How much of the challenge is expected to be alleviated by the project?

• How does the water resource challenge affect their ability to serve their customers, maintain or improve service levels, and/or pose a significant risk to human health or life?

• What percent of the total project cost addresses the water resource challenge?

CRITERION 6: ADDRESSES IDENTIFIED PRIORITIES The extent to which the project addresses identified municipal, State, or regional priorities. 33 U.S.C. § 3907(b)(2)(I); 40 C.F.R. § 35.10055(a)(8).

EPA will evaluate each project on the depth and degree to which it addresses identified municipal, state, or regional priorities.

Prospective borrowers are encouraged to:

• Demonstrate where the project is documented as a priority by referencing documents such as regulatory implementation plans, economic development plans, system master plans, and asset management plans.

• Reference legislative, regulatory, or executive mandates or requirements that provide support for the project.

• Describe whether and how the project addresses the requirements of the Clean Water Act and the Safe Drinking Water Act and how the project improves public health levels or alleviates public health concerns, such as the reduction of lead or other contaminants in drinking water.

• How the project can impact air, water, or land pollution levels in the environment if the prospective borrower provides supporting data and whether a project addresses existing environmental or public health violations.

• Describe whether a project is intended to meet expected or pending regulatory standards or legislative or executive mandates.

Prospective borrowers should provide information about the following when responding to this criterion:

• Is the project identified in a municipal, state, or regional priority in a planning document or legislative, regulatory, or executive mandate?

• Do existing conditions meet regulatory requirements? Without implementing the project, could these conditions deteriorate?

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• Does the project help significantly improve environmental or public health conditions, even if existing conditions meet regulatory requirements?

• Does the project address impending or new regulatory requirements or executive or legislative mandates?

• Is the project necessary to resolve public health or environmental violations or enforcement actions?

CRITERION 7: REPAIR, REHABILITATION, OR REPLACEMENT The extent to which the project addresses needs for repair, rehabilitation or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system. 40 C.F.R. § 35.10055(a)(12).

EPA will evaluate each project on the depth and degree to which it addresses needs for repair, rehabilitation or replacement of a treatment works, community water system, or aging water distribution or wastewater collection system. This includes repair, rehabilitation, or replacement projects to reduce exposure to lead and other contaminants in drinking water. EPA understands the need to repair, rehabilitate, or replace certain system assets in advance of eminent failure to achieve cost efficiencies and maintain system service levels.

Prospective borrowers should provide information about:

• The percentage of the total project cost that addresses repair, rehabilitation, and replacement. • Documentation that confirms system needs that are being addressed through the proposed

project and the larger system need. For example, if a project includes the replacement of a 10-year old distribution pipe, the prospective borrower may wish to explain how that replacement is part of achieving the overall repair, rehabilitation, and replacement needs of the system.

CRITERION 8: ECONOMICALLY STRESSED COMMUNITIES The extent to which the project serves economically stressed communities, or pockets of economically stressed rate payers within otherwise non-economically stressed communities. 40 C.F.R. § 35.10055(a)(13).

EPA will evaluate the depth and degree to which the project serves economically stressed communities, or pockets of economically stressed rate payers within otherwise non-economically stressed communities. Access to financing for critical infrastructure projects in these communities is often lacking or difficult to obtain.

A community or set of ratepayers can be considered economically stressed if:

• The Median Household Income (MHI) from the U.S. Census Bureau’s American Community Survey is less than the state average.

• The Personal Income Per Capita (IPC) from the Bureau of Economic Analysis (BEA) is less than the state average.

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• The poverty rate or child poverty rate is more than the equivalent state measure from the U.S. Census Bureau, Small Area Income and Poverty Estimates average.

• The percent of people under the age of 5 or over age 64 is higher than the state average.

• Other relevant state and local measures or indicator of affordability are met.

In addition, individuals with private wells and septic systems that cannot afford access to adjacent public water or wastewater systems or communities with a significant need for reducing lead exposure can also be considered an economically stressed community.

For purposes of evaluating a project for this selection criterion, a “significant portion of the population” should be a number greater than 20 percent.

Prospective borrowers should provide information about the following when responding to this criterion:

• Does the project serve some economically stressed communities or rate payers?

• Does the project serve a community where a significant portion of the population are economically stressed communities?

CRITERION 9: REDUCES EXPOSURE TO LEAD The extent to which the project reduces exposure to lead in the nation’s drinking water systems or ensures continuous compliance with contaminant limits. 40 C.F.R. § 35.10055(b).

EPA will evaluate the project on the depth and degree to which the project reduces exposure to lead in the nation’s drinking water systems or ensures continuous compliance with contaminant limits. Project elements can include:

• Identification and replacement of lead service lines and distribution pipes, including galvanized steel pipes.

• Corrosion control optimization in the water system.

• Rehabilitation of wells or development of eligible sources to replace contaminated sources.

• Implementing optimized source water blends to minimize corrosion and reduce contaminants.

• Rehabilitation, replacement, or installation of pipes to prevent contamination caused by leaky or broken pipes.

• Improvements to meet or maintain drinking water quality standards.

EPA will score this criterion based on the percent of the total project cost that addresses reducing exposure to lead in a water system or maintains compliance with contaminant limits.

Prospective borrowers should provide information about the following when responding to this criterion:

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• Percentage of total project cost and project elements which addresses reducing lead exposure in the water system.

• Percentage of total project cost and project elements which addresses maintaining compliance with contaminant limits.

PROJECT READINESS

CRITERION 1: READINESS TO PROCEED The readiness of the project to proceed toward development, including a demonstration by the obligor that there is a reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after the date on which a Federal credit instrument is obligated for the project under [WIFIA]. 33 U.S.C. § 3907(b)(2)(J); 40 C.F.R. § 35.10055(a)(9).

EPA will evaluate the project on the depth and degree to which it is ready to proceed toward development. In doing so, EPA will assess whether there is a reasonable expectation that the contracting process for construction of the project can commence by not later than 90 days after obligation.

EPA will evaluate:

• Where the project is in the schedule at the time of the letter of interest submittal.

• Whether there are any other issues that may affect the development and financing of the project, such as community support, pending legislation, permitting, or litigation.

• The reasonableness and level of detail provided in the projected development schedule for specifications and bid documents for traditional project delivery methods, such as design-bid-build.

• The projected development schedule for procurement documents, such as Requests for Qualifications and Proposals, for alternative project delivery methods, such as design-build projects.

Prospective borrowers should provide information about the following when responding to this criterion:

• Project delivery method (i.e. design-bid-build, design-build, public private partnership).

• The expected dates for bidding/procurement and construction for the project (Can reference project schedule).

• Any issues that may affect the development and financing of the project, such as community support, pending legislation, permitting, or litigation.

• Design stage at letter of interest submittal.

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CRITERION 2: PRELIMINARY ENGINEERING FEASIBILITY ANALYSIS Preliminary engineering feasibility analysis score. 33 U.S.C. § 3907(a)(2); 33 U.S.C. § 3907(a)(6); 40 C.F.R. § 35.10015(c); 40 C.F.R. § 35.10045(a).

See section 5.4

BORROWER CREDITWORTHINESS

CRITERION 1: ENABLES PROJECT TO PROCEED EARLIER The likelihood that assistance under [WIFIA] would enable the project to proceed at an earlier date than the project would otherwise be able to proceed. 33 U.S.C. § 3907(b)(2)(C); 40 C.F.R. § 35.10055(a)(2).

EPA will evaluate the likelihood that WIFIA assistance would enable the project to proceed at an earlier date than the project would otherwise be able to proceed. EPA will consider whether WIFIA funding accelerates an individual project receiving a loan or, if by providing significant savings on one project, WIFIA assistance allows a prospective borrower to accelerate additional non-WIFIA projects.

Prospective borrowers can demonstrate the effect of WIFIA funding on the project implementation schedule and/or a Capital Improvement Plan. EPA understands that a project that is nearing its construction phase may need to be delayed to incorporate federal cross-cutters and other program requirements. However, even if WIFIA delays implementation of one project, it could help accelerate other needed projects planned by the prospective borrower.

Prospective borrowers should provide information about the following when responding to this criterion:

• How does WIFIA funding affect the project development schedule?

• Would WIFIA funding allow the prospective borrower to implement other high priority projects sooner than anticipated?

• Without WIFIA funding, would the project be implemented?

CRITERION 2: FINANCING PLAN The extent to which the project financing plan includes public or private financing in addition to assistance under [WIFIA]. 33 U.S.C. § 3907(b)(2)(B); 40 C.F.R. § 35.10055(a)(10).

EPA will evaluate the letter of interest on the depth and degree to which the project financing plan includes public or private financing in addition to WIFIA assistance. EPA will evaluate the project’s creditworthiness as stated in the WIFIA rule separately from the selection criteria scoring as described in Section 6.2 of the Program Handbook.

Prospective borrowers should provide information about the following when responding to this criterion:

• The percentage of WIFIA financing requested in the letter of interest

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• Non-WIFIA funding sources for the project and their certainty (i.e. received, pending, awarded)

CRITERION 3: REDUCTION OF FEDERAL ASSISTANCE The extent to which assistance under [WIFIA] reduces the contribution of Federal assistance to the project. 33 U.S.C. § 3907(b)(2)(K); 40 C.F.R. § 35.10055(a)(11).

EPA will evaluate each project on the depth and degree to which WIFIA assistance reduces the contribution of Federal assistance to the project.

Prospective borrowers should provide information about the following when responding to this criterion:

• The percentage of project financing requested of WIFIA

• Whether the prospective borrower has additional Federal assistance that will be reduced if WIFIA funding is received

CRITERION 4: USE OF BUDGET AUTHORITY The amount of budget authority required to fund the Federal credit instrument made available under [WIFIA]. 33 U.S.C. § 3907(b)(2)(E).

The amount of budget authority required to fund a WIFIA loan is a function of the borrower’s preliminary creditworthiness assessment and the size of the requested loan. A low preliminary creditworthiness assessment score will result in a greater use of budget authority than a similarly sized loan with a high preliminary creditworthiness assessment score. A large loan will result in a greater use of budget authority than a small loan with similar preliminary creditworthiness assessment scores.

CRITERION 5: PRELIMINARY CREDITWORTHINESS ASSESSMENT Preliminary creditworthiness assessment score. 33 U.S.C. § 3907(a)(1); 40 C.F.R. § 35.10015(c); 40 C.F.R. § 35.10045(a)(1); 40 C.F.R. § 35.10045(a)(4); 40 C.F.R. § 35.10045(b).

See section 5.4

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A P P E N D I X D : F E E S C H E D U L E 39 Eligible WIFIA program prospective borrowers and borrowers will be responsible for all fees and costs associated with the WIFIA program.

TABLE D-1: WIFIA PROGRAM FEES

Fee Type Amount Specified in Which Document

Applies to Whom

Application Fee $100,000 or $25,000 (for projects serving small communities)

Application Form Applicant

Credit Processing Fee Costs incurred to the EPA minus application fee

Invoice at Closing Applicant

Optional Supplemental Fee

As applicable by agreement between WIFIA program and applicant

Credit Agreement Applicant

Loan Servicing Fee As applicable Credit Agreement Borrowers

Extraordinary Expenses Fee

As applicable Credit Agreement Distressed borrowers

39 The fee rule can be found at: https://www.federalregister.gov/documents/2017/06/28/2017-13438/fees-for-water-infrastructure-project-applications-under-wifia.

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A P P E N D I X E : C O M P L I A N C E R E Q U I R E M E N T S Projects receiving WIFIA credit assistance must comply with all federal laws and regulations, including, but not limited to the requirements described in Section 2.7 and the following.

ENVIRONMENTAL AUTHORIT IES • Archeological and Historic Preservation Act, Pub. L. 93-291, as amended:

https://www.nps.gov/archeology/tools/laws/ahpa.htm

• Archaeological Resources Protection Act, 16 U.S.C. §§ 470aa-mm: http://www.nps.gov/archeology/tools/Laws/arpa.htm

• Bald and Golden Eagle Protection Act, 16 U.S.C. §§ 668-668c: https://www.fws.gov/midwest/midwestbird/EaglePermits/bagepa.html

• Clean Air Act, Pub. L. 95-95, as amended: https://www.epa.gov/clean-air-act-overview

• Clean Water Act, Titles III, IV and V, Pub. L. 92-500, as amended: https://www.epa.gov/laws-regulations/summary-clean-water-act

• Coastal Barrier Resources Act, Pub. L. 97-348: https://www.fws.gov/ecological-services/habitat-conservation/cbra/Act/index.html

• Coastal Zone Management Act, Pub. L. 92-583, as amended: https://coast.noaa.gov/czm/about/

• Endangered Species Act, Pub. L. 93-205, as amended: https://www.fws.gov/endangered/

• Farmland Protection Policy Act, Pub. L. 97-98: https://www.nrcs.usda.gov/wps/portal/nrcs/detail/?cid=nrcs143_008275

• Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations Environmental Justice, Executive Order 12898, 59 Fed. Reg. 7629, February 11, 1994: https://www.archives.gov/files/federal-register/executive-orders/pdf/12898.pdf

• Fish and Wildlife Coordination Act, Pub. L. 85-624, as amended: https://www.fws.gov/laws/lawsdigest/fwcoord.html

• Floodplain Management, Executive Order 11988, 42 Fed. Reg. 26951, May 24, 1977, as amended by Executive Order 13690, 80 Fed. Reg. 6425, February 4, 2015, https://www.archives.gov/federal-register/codification/executive-order/11988.html, https://www.whitehouse.gov/the-press-office/2015/01/30/executive-order-establishing-federal-flood-risk-management-standard-and-, and https://www.fema.gov/media-library/assets/documents/110377

• Magnuson-Stevens Fishery Conservation and Management Act, Pub. L. 94-265: https://www.fisheries.noaa.gov/resource/document/magnuson-stevens-fishery-conservation-and-management-act

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• Marine Mammal Protection Act, 16 U.S.C. §§ 1361-1407: http://www.nmfs.noaa.gov/pr/laws/mmpa/

• Migratory Bird Treaty Act, 16 U.S.C. §§ 703-712: https://www.fws.gov/birds/policies-and-regulations/laws-legislations/migratory-bird-treaty-act.php

• National Historic Preservation Act, Pub. L. 89-655, as amended: https://www.nps.gov/archeology/tools/laws/NHPA.htm

• National Environmental Policy Act of 1969, 42 U.S.C. § 4321 et seq., https://www.epa.gov/nepa

• Native American Graves Protection and Repatriation Act, 25 U.S.C. § 3001 et seq: https://www.nps.gov/nagpra/

• Protection of Children from Environmental Health Risks and Safety Risks, Executive Order

13045, 62 Fed. Reg. 19885, April 21, 1997: https://www.gpo.gov/fdsys/pkg/FR-1997-04-23/pdf/97-10695.pdf

• Protection of Wetlands, Executive Order 11990, 42 Fed. Reg. 26961, May 24, 1977, as amended by Executive Order 12608, 52 Fed. Reg. 34617, Sept. 14, 1987: https://www.epa.gov/cwa-404

• Rivers and Harbors Act, 33 U.S.C. § 403: http://www.sam.usace.army.mil/Missions/Regulatory/RegulatoryFAQ/RiversandHarborsAppropriationActof1899.aspx

• Safe Drinking Water Act, Pub L. 93-523, as amended: https://www.epa.gov/ground-water-and-drinking-water

• Wild and Scenic Rivers Act, Pub. L. 90-54, as amended: https://rivers.gov/

• Wilderness Act, 16 U.S.C. § 1131 et seq.: https://wilderness.nps.gov/faqnew.cfm

ECONOMIC AND MISCELLANEOUS AUTHORIT IES • Debarment and Suspension, Executive Order 12549, 51 Fed. Reg. 6370, Feb. 18, 1986:

https://www.archives.gov/federal-register/codification/executive-order/12549.html

• Demonstration Cities and Metropolitan Development Act, Pub. L. 89 -754, as amended, and Executive Order 12372, 47 Fed. Reg. 30959, July 14, 1982: http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning

• Drug-Free Workplace Act, Pub. L. 100-690: https://webapps.dol.gov/elaws/asp/drugfree/screen4.htm

• Labor Standards, 33 U.S.C. § 1372, https://www.dol.gov/whd/govcontracts/dbra.htm

• New Restrictions on Lobbying, Section 319 of Pub. L. 101-121: https://www.epa.gov/grants/lobbying-and-litigation-information-federal-grants-cooperative-agreements-contracts-and-loans

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• Prohibitions relating to violations of the Clean Water Act or Clean Air Act with respect to federal contracts, grants, or loans under Section 306 of the Clean Air Act and Section 508 of the Clean Water Act, and Executive Order 11738, 38 Fed. Reg. 25161, Sept. 10, 1973: https://www.archives.gov/federal-register/codification/executive-order/11738.html

• The Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (42 U.S.C. § 4601 et seq.): https://www.gpo.gov/fdsys/pkg/FR-2005-01-04/pdf/05-6.pdf

C IV IL R IGHTS, NONDISCRIMINATION, EQUAL EMPLOYMENT OPPORTUNITY AUTHORIT IES

• Age Discrimination Act, Pub. L. 94-135: https://www.eeoc.gov/laws/statutes/adea.cfm

• Equal Employment Opportunity, Executive Order 11246, 30 Fed. Reg. 12319, Sept. 24, 1965: https://www.dol.gov/ofccp/regs/compliance/ca_11246.htm

• Section 13 of the Clean Water Act, Pub. L. 92-500: https://www.epa.gov/ocr/external-civil-rights-compliance-office-title-vi

• Section 504 of the Rehabilitation Act, Pub. L 93-112 supplemented by Executive Orders 11914, 41 Fed. Reg. 17871, April 29, 1976 and 11250, 30 Fed. Reg. 13003, October 13, 1965, https://www.epa.gov/ocr/external-civil-rights-compliance-office-title-vi

• Title VI of the Civil Rights Act of 1964 (42 U.S.C. § 2000d et seq.): https://www.epa.gov/environmentaljustice/title-vi-and-environmental-justice

• Participation by Disadvantaged Business Enterprises in Procurement under EPA Financial Assistance Agreements, 73 Fed. Reg. 15904: https://www.epa.gov/resources-small-businesses

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A P P E N D I X F : C O N F I D E N T I A L B U S I N E S S I N F O R M A T I O N ( C B I )

A prospective borrower may assert a business confidentiality claim covering part or all of the information submitted to EPA as part of its [letter of interest] [application] in a manner consistent with 40 C.F.R. § 2.203, 41 Fed. Reg. 36902 (Sept. 1, 1976), by placing on (or attaching to) the information a cover sheet, stamped or typed legend, or other suitable form of notice employing language such as trade secret, proprietary, or company confidential. The prospective borrower should also state whether it desires confidential treatment until a certain date or until the occurrence of a certain event. Information covered by a business confidentiality claim will be disclosed by EPA only to the extent and only by means of the procedures set forth under 40 C.F.R. Part 2, Subpart B. Information that is not accompanied by a business confidentiality claim when it is received by EPA may be made available to the public by EPA without further notice to the applicant.

EPA will presume that information claimed as CBI in accordance with the above procedures is entitled to confidential treatment until it receives a Freedom of Information Act request for the information or until further review is warranted. See 40 C.F.R. Part 2, Subpart B. EPA will then afford the prospective borrower an opportunity to substantiate the CBI claim, i.e., demonstrate to the Agency that the release of the information would impair EPA’s ability to obtain similar information in the future, or that its release would likely cause substantial competitive harm, before making a final confidentiality determination on the information. Applicants may waive or withdraw CBI claims at any time. EPA reserves the right to request substantiation at any time following a business confidentiality claim.

Confidential business information (CBI) refers to “commercial or financial information that is obtained from a person and that is privileged or confidential.” 5 U.S.C. § 552(b)(4). Information that qualifies as CBI is exempt from disclosure under Exemption 4 of the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552(b)(4), upon a finding that the information is entitled to confidential treatment. Information in the public domain is not “confidential” and cannot qualify for confidential treatment under Exemption 4.

For each item or class of information that is claimed as CBI, the Agency will ask submitters to answer the following questions, giving as much detail as possible. EPA will consider the comments in response to these questions when determining whether the information has been shown to be entitled to confidential treatment.

1. For what period of time do you request that the information be maintained as confidential, e.g., until a certain date, until the occurrence of a specified event, or permanently? If the occurrence of a specific event will eliminate the need for confidentiality, please specify that event.

2. Information submitted to the EPA becomes stale over time. Why should the information you claim as confidential be protected for the time period specified in your answer to question #1?

3. What measures have you taken to protect the information claimed as confidential? Have you disclosed the information to anyone other than a governmental body or someone who is

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bound by an agreement not to disclose the information further? If so, why should the information be considered confidential?

4. Is the information contained in any publicly available material such as the Internet, publicly available databases, promotional publications, annual reports, or articles? If so, specify which.

5. Is there any means by which a member of the public could obtain access to the information? Is the information of a kind that you would customarily not release to the public?

6. Has any governmental body made a determination as to the confidentiality of the information? If so, please attach a copy of the determination.

7. For each item or category of information claimed as confidential, explain with specificity why release of the information is likely to cause substantial harm to your competitive position. Explain the specific nature of those harmful effects, why they should be viewed as substantial, and the causal relationship between disclosure and such harmful effects. How could your competitors make use of this information to your detriment?

8. Do you assert that the information is submitted on a voluntary or a mandatory basis? Please explain the reason for your assertion. If you assert that the information is voluntarily submitted information, please explain whether the information is the kind that would customarily not be released to the public.

9. Whether you assert the information as voluntary or involuntary, please address why disclosure of the information would tend to lessen the availability to the EPA of similar information in the future.

10. If you believe any information to be (a) trade secret (s), please so state and explain the reason for your belief. Please attach copies of those pages containing such information with brackets around the text that you claim to be (a) trade secret (s).

11. Explain any other issue you deem relevant (including, if pertinent, reasons why you believe that the information you claim to be CBI is not emission data or effluent data).

The prospective borrower bears the burden of substantiating a confidentiality or trade secret claim. Generalized or conclusory statements will be given little or no weight in EPA’s determination on the confidentiality of the information you claim to be CBI.

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A P P E N D I X G : L E T T E R O F I N T E R E S T T I P S This section provides prospective borrowers with some tips to consider while preparing and submitting a letter of interest.

GENERAL TIPS • Read the instructions in the NOFA and the program handbook prior to completing your letter of

interest.

• Answer every question and when relevant provide additional supporting material to support your answer.

• Provide specific references when pointing to supporting documents.

• Remember your audience is learning about your system for the first time and needs contextual information to understand your project.

• Submit early to avoid issues with large file sizes at the deadline.

• Attend one of the webinars offered following the NOFA release.

• Ask questions: contact us by phone at 202-564-2292 or at wifia@epa.gov.

SECTION A - PROSPECTIVE BORROWER INFORMATION • Private entities must demonstrate public sponsorship by including a certified letter signed by

the approving State, tribal, or municipal department or similar agency; governor, mayor or other similar designated authority; statute or local ordinance, or any other means by which government approval can be evidenced. The public entity must be a sponsor or regulator of the project.

SECTION B – PROJECT PLAN • Project Description Tips

o Indicate whether the project is for new construction and/or rehabilitation/replacement of existing infrastructure.

o Indicate the type of project (i.e. wastewater, drinking water, stormwater, water recycling, desalination, habitat restoration and protection).

o Include the scope, including major technical components and their size.

o Projects with limited engineering documents to submit should provide a longer, more detailed project description.

• Project Purpose Tips

o Project need examples include, but are not limited to: meet current or impending federal, state or local regulatory requirements; make the system more resilient,

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reliable and efficient; inadequate water supply or quality; required to address identified federal, state, or local priorities.

o Examples of benefits to the community and the environment include: number of people served by the system or project; characteristics of the community served; public health impacts; environmental resources that will be affected; water quality or quantity impact; other resources that benefit, such as air quality, habitat; economic and recreational impacts.

• Provide enough information for the WIFIA program to evaluate engineering feasibility, including of scope, plan, schedule and cost details, at the current project stage.

• Provide system master plans or asset management plans when available, because they are very helpful in supporting the need for a project and indicate that the project is being implemented in a well thought out manner with regard to your system needs.

• Submit complete documents as attachments, but identify in the letter of interest or through annotation where relevant information is located.

• If multiple projects are included in one letter of interest, provide cost, scope (including locations and major capacity or dimension details) and schedule information for each individual project being proposed.

• If the project proposes a new or innovative approach, a risk assessment matrix, if available, can help with the feasibility analysis.

• Schedule Tips:

o Include major planning, permitting, environmental review, design, and construction start and end dates.

o Indicate whether, and in what way, WIFIA funding would speed up the schedule.

o If possible, anticipate how federal cross-cutter requirements could impact schedule.

• Environmental Review Plan tips:

o Provide accurate and clear location information.

o Describe any state or federal reviews already undertaken (i.e. State Environmental Review Process or Army Corps of Engineers Section 404 permit).

o Provide details of any cross-cutting requirement coordination that has already occurred.

o Indicate whether major cross-cutters are impacted (NEPA, NHPA, ESA, and EJ) and the status of consultations, if applicable.

o Provide draft or final environmental information documents as attachments.

o Indicate whether the project could be eligible for a CATEX (40 CFR § 6.204).

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SECTION C – OPERATIONS AND MAINTENANCE PLAN • If a comprehensive plan is not available yet, provide an explanation of major topics to be

included in the final plan or a table of contents.

• Any lifecycle costs or assessments available should be submitted as attachments.

• Provide a description of experience with similar technology at another facility, if applicable.

• Note the estimated useful life of the major assets included in the project.

SECTION D – FINANCING PLAN • Project sources and uses should be clearly presented and include a description of each funding

source’s level of commitment.

• Propose a credit structure for the WIFIA loan noting the following: whether debt will be issued under an existing or new indenture and WIFIA’s lien position including whether the WIFIA loan will be subordinate to ongoing non-project debt secured with the same pledge.

• WIFIA’s revenue pledge should be clear and describe long-term revenue projections or the financial condition of the issuer of a general obligation.

• Credit enhancement will be accepted to compliment the source of revenue; for example, a general obligation pledge may backstop water system rate revenues.

• Provide consistent, transparent and realistic assumptions. The WIFIA program will review the financial model, credit rating letters and other supporting materials to validate.

• A demonstration of creditworthiness for a prospective borrower’s proposed capital structure should include historical and forward looking debt coverage ratios, liquidity and leverage.

• Provide supporting documents such as rate studies/increase plans and audited financial statements.

• Provide breakdown of project costs by category as requested in letter of interest form (construction, design, planning, etc.).

• Include detailed construction cost estimates (such as unit pricing) as attachments and provide a basis for the determination of contingency sizing.

• Pro Forma Tips:

o A financial pro forma provides EPA with insight into the borrower’s operating performance and their ability to manage existing and future debt payments.

o The pro forma focuses on four key components: Operating performance, cash available for capital expenditures and other obligations, debt service coverage, and capital structure.

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o Income Statement Section: Provides an overview of the borrower’s current and projected operational performance and identifies key revenues and expenses, providing a general understanding of the project’s operating and net income.

o Cash Flow & Debt Service Coverage Sections: Using the income statement's Net income, Total revenue, and Subtotal-Expenses, we can determine the borrower’s Net System Revenues and Funds from Operations (FFO). FFO demonstrates how much cash would be available for capital expenditures and debt obligations. Net System Revenues helps inform the WIFIA reviewers of the borrower’s ability to service debt obligations with generated net revenues.

o Debt Balances Section: Prospective borrowers may have existing, amortizing debt on the balance sheet. Debt balances must be shown through the life of the loan. Illustrates when new debt issues are planned and when existing obligations will be retired.

SECTION E - SELECTION CRITERIA • Responses should generally be one to three paragraphs long.

• Responses should focus on how the project requesting WIFIA funding relates to the selection criteria.

• Reference this handbook which describes how each criterion will be evaluated.

SECTION F – CONTACT INFORMATION • To allow for quick and timely communication, list at least one staff person who works day-to-

day on the project as the contact.

SECTIONS G - CERTIFICATIONS • Make sure to read and sign all the signature boxes.

SECTIONS H - NOTIFICATION OF SRF • Initialing is an opt-out of sharing letter of interest materials with the relevant state SRF

program in the Notification to the SRF signature box.

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A P P E N D I X H : N E P A A P P L I C A B I L I T Y O V E R V I E W This Appendix presents the criteria EPA uses to make a preliminary NEPA assessments for proposed projects.

CATEGORICAL EXCLUSION EPA determines if a proposed project qualifies for a Categorical Exclusion under 40 C.F.R. § 6.204(a)(1)(ii) or 40 C.F.R. § 6.204(a)(1)(iii), with consideration of extraordinary circumstances under 40 C.F.R. § 6.204(b). Table H-1 below outlines the above referenced implementing regulations for CATEXs.

TABLE H-1: CATEX ASSESSMENT CRITERIA

Is the project eligible for a categorical exclusion?40 Answer the following questions in their entirety to make this determination.

If yes to any, CATEX may apply

Does the project involve existing infrastructure systems (e.g., sewer systems; drinking water supply systems; stormwater systems, including combined sewer overflow systems) and involve: • Minor upgrading? • Minor expansion of system capacity or rehabilitation (including functional replacement)

of the existing system and its components (such as the sewer collection network and treatment system; the system to collect, treat, store and distribute drinking water; and stormwater systems, including combined sewer overflow systems)?

• Construction of new minor ancillary facilities next to or on the same property as existing facilities?

Will the project occur in unsewered communities and involve replacing existing onsite systems with ones that do not: • Substantially increase discharge volumes or pollutant loadings from existing sources? • Relocate existing discharge?

If yes to any, CATEX does not apply

Will the project: • Involve new or relocated discharges to surface or ground water? • Be likely to substantially increase the volume or loading of pollutants to the receiving

water? • Provide capacity to serve a population 30% greater than the existing population? • Involve actions not supported by the state (or other regional) growth plan or strategy? • Directly or indirectly involve or relate to upgrading or extending infrastructure systems

primarily for future development?

40 Refer to 40 C.F.R. § 6.204(a)(1) for more on CATEX determination. This list only references relevant CATEX components.

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Does the project involve any of the following extraordinary circumstances, which would make it ineligible for a categorical exclusion?41

If yes to any, CATEX does not apply

It is expected to have potentially significant impacts on the quality of the human environment, either immediately or cumulatively over time. It is expected to have disproportionately high and adverse human health or environmental effects on any community, including minority communities, low-income communities, or federally recognized Indian tribal communities. It is expected to significantly affect federally listed, threatened, or endangered species, or their critical habitat. It is expected to significantly affect national natural landmarks or any property with nationally significant historic, architectural, prehistoric, archeological, or cultural value, including (but not limited to) property listed on or eligible for the National Register of Historic Places. It is expected to significantly affect environmentally important natural resource areas such as wetlands, floodplains, significant agricultural lands, aquifer recharge zones, coastal zones, barrier islands, wild and scenic rivers, and significant fish or wildlife habitat. It is expected to cause significant adverse air quality effects. It is expected to have a significant effect on the pattern and type of land use (industrial, commercial, agricultural, recreational, residential) or the growth and distribution of population, including a change to the character of existing residential areas. It may not be consistent with state, local, or federally recognized Indian tribe–approved land use plans, or with federal land management plans. It is expected to cause significant public controversy about an environmental impact it may have. It is expected to involve providing financial assistance to a federal agency through an interagency agreement for a project that is known or expected to have potentially significant environmental impacts. The project is expected to conflict with federal, state, local, or federally recognized Indian tribe environmental, resource-protection, or land-use laws or regulations.

41 Refer to 40 C.F.R. § 6.204(b) for more on extraordinary circumstances.

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ENVIRONMENTAL ASSESSMENT /ENVIRONMENTAL IMPACT STATEMENT To determine if an environmental assessment or environmental impact statement should be prepared for a project, EPA will consider EPA’s NEPA Implementing Regulations for Environmental Assessments (40 CFR §6.205) and Environmental Impact Statements (40 CFR §6.207). EPA will also consider additional implementing regulations for EISs found at 40 CFR 1507.3(b)(2). EPA will consider these assessment criteria if the proposed action does not qualify for a CATEX. Table H-2 below outlines the above referenced implementing regulations for EAs and EISs.

TABLE H-2: EA AND EIS ASSESSMENT CRITERIA

Will the project require an Environmental Assessment (EA) and/or a more detailed Environmental Impact Statement (EIS)?

If yes to any, an EA is normally required

Is the project expected to have environmental impacts that are not significant, or whose significance is not known?

More specifically, will the project involve any of the following, which typically require the preparation of an EA? • The award of wastewater treatment construction grants under Title II of the Clean

Water Act. • EPA’s issuance of new source NPDES permits under Section 402 of the Clean Water

Act. • EPA actions involving renovations or new construction of facilities.

If yes to any, an EIS is normally required

Will the project significantly affect the quality of the human environment, including actions for which the EA analysis demonstrates that significant impacts will occur that will not be reduced or eliminated by changes to or mitigation of the proposed action? Does the project involve new regional wastewater treatment facilities or water supply systems for a community with a population greater than 100,000? Does the project involve expansions of existing wastewater treatment facilities that will increase existing discharge to an impaired water by greater than 10 million gallons per day? Does the project involve issuance of new source NPDES permit for a new major industrial discharge? Does the project involve issuance of a new source NPDES permit for a new oil/gas development and production operation on the outer continental shelf? Does the project involve issuance of a new source NPDES permit for a deepwater port with a projected discharge in excess of 10 mgd?

Does the project involve discharge treated effluent from a new or modified existing facility into a body of water and the discharge that is likely to have a significant effect on the quality of the receiving waters? Is the proposed action likely to directly, or through induced development, have significant adverse effect upon local ambient air quality or local ambient noise levels? Is the proposed action likely to have significant adverse effects on surface water reservoirs or navigation projects? Will the proposed action be inconsistent with state or local government, or federally-recognized Indian tribe approved land use plans or regulations, or federal land management plans?

WIFIA Program Handbook

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Will the proposed action be inconsistent with state or local government, or federally-recognized Indian tribe environmental, resource-protection, or land-use laws and regulations for protection of the environment? Is the proposed action likely to significantly affect the environment through the release of radioactive, hazardous or toxic substances, or biota? Does the proposed action involve uncertain environmental effects or highly unique environmental risks that are likely to be significant? Is the proposed action likely to significantly affect national natural landmarks or any property on or eligible for the National Register of Historic Places? Is the proposed action likely to significantly affect environmentally important natural resources such as wetlands, significant agricultural lands, aquifer recharge zones, coastal zones, barrier islands, wild and scenic rivers, and significant fish or wildlife habitat? The proposed action in conjunction with related federal, state or local government, or federally-recognized Indian tribe projects is likely to produce significant cumulative impacts. The proposed action is likely to significantly affect the pattern and type of land use (industrial, commercial, recreational, residential) or growth and distribution of population including altering the character of existing residential areas.

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Office of Wastewater Management

Water Infrastructure Division

Washington, DC 20460

www.epa.gov/wifia

EPA-830-B-17-001